Notes to Accounts of Setco Automotive Ltd.

Mar 31, 2021

Investments in other related entities, Subsidiaries/Joint Venture have been made in terms of investment limits approved by Board of Directors of the company from time to time.

The Company has entered into a joint venture agreement with Lingotes Especiales, Spain to establish a Foundry Project in Lava Cast Private Limited. The Company holds 89.68% Equity shares as on 31st March, 2021 in this joint venture and accordingly Lava Cast Private Limited has been reported as subsidiary company in financial statements.

As per Legal Experts'' opinion obtained by the Company on its investment (along with Corporate Guarantee extended to the Bankers of investee company) in F.Y2013-14, Lava Cast Private Limited qualifies to be treated as both, Subsidiary and Joint Venture for legal purposes and the Company''s exposure in Lava Cast Private Limited is in compliance with the provisions of Sections 185 & 186 of the Companies Act, 2013 and relevant Rules prescribed there under.

The net worth of Lava Cast Private Limited eroded due to losses. Based on report of Independent valuer as per DCF method, no impairment is required to be provided.

This investment in 0% Redeemable Preference Shares is, in substance investment in Equity instruments based on terms of the said instruments and hence treated accordingly at Deemed Cost.

The company has provided ECL on investments in Equity and preference shares in WEW Holdings Limited (Mauritius) in respect of its holding in Setco Automotive (UK) Ltd.

Pending compliance of bank conditions, company could not remit share application money to Setco MEA DMCC, resulting to non issuance of share certificate to the company. The company has recognised it as investment in the wholly owned foreign subsidiary based on 100% control. The Company has decided to close this subsidiary vide Board Resolution dated 09.02.2021.

100 shares are held by Mr. Harish sheth as a Nominee shareholder.

An amount of Rs. 1,834.99 lakhs (Rs. 3,260.97 lakhs) against export receivables as on 31st March 2021, beyond the timelines stipulated under the Foreign Exchange Management Act, 1999. The management of the Company has submitted necessary applications with the appropriate authority for condonation of delays to regularize the default. Impact thereof if any, will be considered when such application is disposed off.

Pursuant to the approval of members in the Annual General Meeting held on 28th September, 2015 the equity shares of face value of Rs. 10/- each have been subdivided into equity shares of face value of Rs. 2/- each with effect from 17th December, 2015. As a result, the number of equity shares has increased from 2,67,19,335 to 13,35,96,675 shares. Accordingly the number of shares has been adjusted for all the periods presented.

The company has only one class of equity shares having a par value of Rs. 2 per share. Each shareholder of equity share is entitled to one vote per share.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

- Indian rupee term loan from Bank of Baroda is repayable in 16 quarterly instalments each of Rs. 141.00 lakhs to be repaid by December, 2021. The loan is secured by first pari passu charge on company''s fixed assets (excluding cars/ vehicles) along with Tata Motors Finance Solutions Limited and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Executive Vice Chairman of the Company.

- In previous year, Lava Cast Private Limited (LCPL), the subsidiary company had obtained Plant & Machinery and Equipment of Rs. 1,441.00 lakhs under finance lease arrangement with Tata Capital Financial Services Ltd. (Lessor). The Lease was secured by Plant & Machinery as well as corporate guarantee of Holding Company i.e. Setco Automotive Limited. During the year, the LCPL has transferred all rights, interests, obligations and benefits i.e. right of use of assets under the Lease Deed to the company at Rs. 1,153.79 lakhs, by entering into a Novation Agreement with the Lessor and the company.

Indian rupee corporate term loan of Rs. 4,500.00 lakhs from Tata Motors Finance Solutions Limited is repayable in 72 EMI each of Rs. 87.44 lakhs to be repaid by May, 2025. The loan is secured by first pari passu charge on company''s present & future fixed assets (excluding cars/vehicles) along with Bank of Baroda and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Executive Vice Chairman of the Company.

Indian rupee corporate term loan of Rs. 1,000.00 lakhs from Tata Motors Finance Solutions Limited is repayable in 72 EMI each of Rs. 19.43 lakhs to be repaid by October, 2025. The loan is secured by first pari passu charge on company''s present & future fixed assets (excluding cars/vehicles) along with Bank of Baroda and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Executive Vice Chairman of the Company.

The above loans are secured by first pari passu charge on company''s present & future fixed assets (excluding cars/vehicles) and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Executive Vice Chairman of the Company.

Indian rupee vehicle loan from ICICI Bank is repayable in 60 EMI each of Rs. 1.01 lakhs to be repaid by December, 2022. The loan is secured by hypothecation of particular vehicle.

Indian rupee vehicle loan from Toyota Financials Services India Pvt. Ltd. is repayable in 60 EMI each of Rs. 0.57 lakhs to be repaid by February, 2025. The loan is secured by hypothecation of particular vehicle.

Indian rupee ECLGS loan of Rs. 1,752.00 lakhs from Tata Motors Finance Solutions Limited is repayable in 48 EMI each of Rs. 45.28 lakhs to be repaid by January. The loan is secured by second pari passu charge on company''s present & future fixed assets (excluding cars/vehicles) along with Bank of Baroda & IDBI.

Indian rupee ECLGS loan of Rs. 369.00 lakhs from IDBI Bank is repayable in 48 monthly instalments each of Rs. 7.69 lakhs to be repaid by December, 2025. The loan is secured by first pari passu charge on company''s present & future current assets & second pari passu charge on entire fixed assets both present and future along with consortium banks.

Indian rupee ECLGS loan of Rs. 357.00 lakhs from Tata Capital Financial Services Limited is repayable in 48 monthly instalments each of Rs. 7.44 lakhs to be repaid by March, 2026.

Indian rupee BCECL loan of Rs. 1,050.00 lakhs from Bank of Baroda is repayable in 18 monthly instalments each of Rs. 58.30 lakhs to be repaid by July, 2022. The loan is secured by first pari passu charge on company''s fixed assets (excluding cars/vehicles) along with Tata Motors Finance Solutions Limited and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Executive Vice Chairman of the Company.

Indian rupee unsecured loan of Rs. 125.00 lakhs from RBD Engineers Pvt Ltd. is repayable in 18 Installments each of Rs. 6.94 lakhs to be repaid by February, 2022.

Indian rupee unsecured loan of Rs. 150.00 lakhs from Jay Casting Co. is repayable in 12 Installments each of Rs. 12.50 lakhs to be repaid by June, 2022.

Indian rupee unsecured loan of Rs. 200.00 lakhs from Rampra Steel Ind.P.Ltd is repayable in 12 Installments each of Rs. 16.67 lakhs to be repaid by June, 2022.

Indian rupee unsecured loan of Rs. 700.00 lakhs from Ahmedabad Strips P. Ltd. is repayable in 12 Installments each of Rs. 58.33 lakhs to be repaid by April, 2022.

Indian rupee vehicle loan from HDFC Bank is repayable in 84 EMI each of Rs. 0.38 lakhs to be repaid by March, 2028. The loan is secured by hypothecation of particular vehicle.

Working capital facilities are secured by first charge by way of hypothecation of current assets including stocks, book debts etc. and second charge on entire fixed assets of the company on paripassu basis.

Unsecured loan is from Tata Capital Financial Services Limited & Tata Motors Finance Solutions Limited.

Lease liability (Current Maturity) is from Tata Capital Financial Services Limited.

This information as required to be disclosed under Micro Small and Medium Enterprise Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company .

i Provision is made for estimated warranty claims at discounted amount in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled as per Warranty Policy. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

In compliance with IND As provisions, the company has made appropriate provisions for impairment/expected credit losses in respect of its investments , loans, receivables etc from its subsidiaries and associate concerns , based on review of the respective balance sheets and valuation reports obtained from approved valuers.

Rs. 1,691.84 lakhs (Rs.1,691.84 lakhs) invested in 20,94,269 (20,94,269) Equity shares of Setco Automotive (UK) Limited, (SAUL), a Wholly Owned Ultimate Foreign Subsidiary, a Technical know how and development hub of the group is for domestic and international markets. SAUL has substantial accumulated losses in the year ended 31st March, 2021 amounting to Rs. 4,809.53 lakhs (Rs. 4,483.43 lakhs). The Company has provided for impairment in value of the same based on a report of independent valuer as per Discounted Cash Flow method.

During the year, the company has invested in preference share of Setco Engineering Pvt. Ltd (SEPL), a Company in which directors have interest. As this investment is compulsorily redeemable on its maturity, the company has treated it as investment in debt instruments and valued at amortised basis. SEPL being a Investment company, its major income source is mainly from the company i.e. Setco Automotive Limited in form of Dividend and Commission. Since, during the year, SEPL has incurred loss, the company has provided impairment on investment to the extent of dividend receivable on it.

The company has formed a 100% subsidiary in UAE in the name of Setco MEA DMCC. The Company''s wholly owned foreign subsidiary Setco MEA, DMCC has eroded net worth due to loss. The Company has provided impairment loss against Trade receivable equal to the net assets deficit reported by the company. Pending compliance of bank conditions, the Company could not remit share application money to this foreign subsidiary, since inception and hence, allotment of share and issue of share certificate is pending. The Company has recognized it as investment in the subsidiary company and consolidated the said subsidiary based on 100% control.

In FY 2017-18, the Company had recognised Rs. 398 lakhs as income being refund of IGST/CGST share of State for the Uttarakhand unit pending notification of incentives by the State Government. The Company believed, the issuance of notification for GST benefits by the State Government was certain based on the notification already issued by the Central Government. In absence of any notification in the said matter till date and based on legal opinion, the company has filed writ petition claiming refund of said amount & has continued to show this as asset recoverable in accounts. In absence of any tangible progress in the matter, company has provided impairment @100% of the amount receivable from Government.

The Company has given capital advance for purchase of machinery to the supplier. The company charged and recovered 10.96% p.a interest upto last year. Due to COVID-19, the supplier is unable to serve interest to the Company and hence impairment is provided @ 100% advance.

This represents amount receivable towards sharing of common expenses from SE Transstadia Pvt. Ltd., (SETPL) a company in which directors have interest. Considering current financial position of SETPL, ECL provision of 20% is made on this amount.

Rs.1,535.00 lakhs (Rs. 1,535.00 lakhs) Invested in Equity shares of SE Transstadia Private Limited, a Unique and State of the Art Sports Infrastructure Project with the latest modern Technology, a first of its kind project in India. The said company has completed the project and has commenced commercial operations in March 2017. The company has accumulated loss of Rs. 20,299.32 lakhs (Rs. 11,180.08 lakhs) as per latest audited Financial Statements as at 31.03.2019 and has eroded entire networth due to loses. Due to non payment of interest and instalments, company''s accounts with bank have became NPA in December, 2018. The company has submitted restructuring proposal to bank on 17.06.2020 and the same is under consideration. The said company is confident of profitable operations post restructuring by banks as proposed and based on report of independent valuer as per DCF method, impairment has been provided.

On physical verification of stocks, stock costing Rs. 1863.92 lakhs were found to be rusty, damaged and unfit for consumption and unretrievable without compromising the quality of finished products. Therefore, such items of stocks are written down in the accounts net of the existing provision and valued at NIL and the net effect is disclosed under the head “Exceptional Items”.

MAT CREDIT

During the year, company has adjusted/(recognised) MAT Credit of Nil for current financial year (Previous year Rs. 165.67 lakhs) and same is shown as adjustment from the current tax amount in the statement of profit and loss. The company has also recognised/(reversed) Net MAT credit of Nil (Rs. 20.71 lakhs) in respect of previous periods.

The company has obtained consent of members to transfer the clutch manufacturing business to a wholly owned subsidiary in EGM held on 22nd May 2021.

Further the compay has obtained member''s consent to purchase trademark/ Brand “LIPE” owned by foreign subsidiaries (SAUL & SANAI) based on valuations done by approved valuers.

In absence of binding agreements/ documents till date in this regard, no effect relating to said proposals are given or recognised in accounts for the year.

SALES-IN-TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the control have not been transferred amounts to Rs. 258.35 lakhs (Rs. 572.94 lakhs). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs. 255.14 lakhs (Rs. 502.08 lakhs) is shown under the head “Finished Goods” in Note 8 under the head “Inventories”.

. Disclosure under section 186 (4) of the Companies Act , 2013

Details of Investments made, loans and corporate guarantee given in respect of subsidiaries are presented at Note no. 3, 4, 12, 13, 17, 22, 38 and 39. Loans and corporate guarantees given are for Business purpose of Subsidiaries.

. Segment information

The Company is operating only in one business segment viz. Auto Components.

Contingent Liabilities and Commitments Contingent Liabilities :

Guarantees given by the bank on behalf of the Company Rs. 14.53 lakhs (Rs. 5.42 lakhs).

Guarantee given for maximum $ 3.00 million ($ 3.00 million) to Bank of Baroda, New York, USA for wholly owned ultimate foreign subsidiary''s credit facilities Rs. 2,220.30 lakhs (Rs. 2,278.80 lakhs). The carrying amounts of related financial guarantee contracts recognised in books of account are Rs. 20.57 lakhs as at 31.03.2021 (Rs. 22.54 lakhs).

Guarantee given for maximum Rs. 18,326.00 lakhs (Rs. 18,326.00 lakhs) to Bank of Baroda, Mumbai, India, for subsidiary''s credit facilities. The carrying amounts of related financial guarantee contracts are recognised in books of account are Rs. 688.85 lakhs as at 31.03.2021 (Rs. 744.30 lakhs).

Note on Pending Litigation :

The Pollution control department had filed a civil /criminal case against the company and all the Directors in 1993. The civil matter was disposed in favour of the company.

In criminal matter against the company and the directors, Hon. High Court had quashed the case against all the nominee directors. The case will now proceed against the company and the managing director in local court. The Company had filed a case against a competitor for cancellation of registration of design granted by Controller of Patents and Designs in Kolkata High Court. In view of the settlement of differences under a consent terms, the said case became infructuous and the process of withdrawal of the case is under process.

The company has received order u/s 143(3) r.w.s 144C(3) with order received from TPO u/s 92CA(3) for AY 2016-17, making additions amounting to Rs. 2.80 lakhs pertaining to notional guarantee fees from SAUL in book profit u/s 115JB resulting to demand of Rs. 0.73 lakhs. Application for stay of demand has been filed along with rectification u/s 154 of Income Tax Act, 1961. In the same order, based on orders passed by CIT(A) -5 Baroda for AY 2013-14 and 2014-15, product development expense was allowed as revenue expenses and accordingly was treated as revenue expenses in the particular year but was rejected by AO. This matter is also covered by ITAT Ahmedabad in our own case for AY 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08. The company has filed an appeal against CIT(A) Baroda for the matter. The company has further received notice u/s 274 r.w.s 271(1)(c ) for the said matter for which application for keeping the proceedings in abeyance till the first appeal is decided has been filed.

The company has received a notice u/s 92CA(1) and 92D(3) of Income Tax Act, 1961 from TPO for AY 2017-18, making additions of Rs. 20.33 lakhs for sales transactions of bought out items from non-eligible unit to eligible unit and disallowing product development expenses as revenue expenses. Due to the addition, demand of Rs. 0.35 lakhs has been raised for which the company has filed an appeal before CIT(A) Baroda. The company has also received notice u/s 274 r.w.s 270A for the additions made and the company has filed an application for keeping the proceedings in abeyance till the first appeal is decided.

The company has received order from A.O. Panchmahals, Godhra range for demand of Rs. 590.13 lakhs by way of adjustment of addition in book profit for calculation of tax under MAT which resulted into the above demand for Assessment Year 2011-2012. The company had preferred an appeal with CIT(A) - 4 Vadodara against such order but was dismissed by CIT(A) giving rise to demand of Rs. 472.10 lakhs. The company has prefered an appeal against the order of CIT(A)-4 Vadodara before ITAT Ahmedabad. The company is confident of receiving adjudication in its favour.

The company as received notice of penalty proceedings u/s 271(c ) for AY 2014-15 for late pament of PF. The company has submitted its replies to AO and is in process and not concluded till date.

The company has received intimation u/s 143(1) of Income Tax Act,1961 from CPC, Bengaluru for A.Y. 2015-16 wherein demand of Rs. 2.00 lakhs have been raised mainly on account of non allowance of deduction u/s 80-IC. The company believes this is a mistake apparent from records and has filed rectification petition u/s 154 of Income Tax Act, 1961. The company is confident that the demand would be dropped in due course of time.

The company has received intimation u/s 143(1) of Income Tax Act,1961 from CPC, Bengaluru for A.Y. 2015-16 wherein demand of Rs. 2.00 lakhs have been raised mainly on account of non allowance of deduction u/s 80-IC. Further product development expense for the year was disallowed as revenue expenses but based on the orders passed in prevoius years by CIT(A)-4 and ITAT, the company has filed a letter with DCIT, Anand Circle.The company believes this is a mistake apparent from records and has filed rectification petition u/s 154 of Income Tax Act, 1961. The company is confident that the demand would be dropped in due course of time.

The company''s management reasonably expects that these cases when ultimately concluded/adjudicated will not have any material or adverse effect on the company''s results or the operations or financial condition.

Commitments :

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 442.18 lakhs (Rs. 672.47 lakhs).

Trade payable and receivables

Trade payables'' balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of trade receivables and other debit/credit balances, for which balance confirmations have been received, are under reconciliation process and necessary adjustments, if any, will be accounted when the same is reconciled. While others are subject to reconciliation and adjustment if any.

Employee Benefits

Disclosure pursuant to Ind AS - 19 “Employee Benefits”

Defined Contribution Plans

An amount of Rs 239.21 lakhs (Rs. 287.89 lakhs) (Provident Fund & ESIC) is recognized as an expense and included in Note 30 under the head “Employee Benefits”.

Gratuity - Long Term Defined Benefit Plan

In accordance with the Payment of Gratuity Act of 1972, the Company contributes to a defined benefit plan (the “Gratuity Plan”) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, disability or termination of employment being an amount based on the respective employee''s last drawn salary and the number of years of employment with the Company.

Description of methods used for sensitivity analysis and its Limitations:

Sensitivity analysis is performed by varying a single parameter while keeping all the other parameters unchanged. Sensitivity analysis fails to focus on the interrelationship between underlying parameters. Hence, the results may vary if two or more variables are changed simultaneously.

The method used does not indicate any thing about the likelihood of change in any parameter and the extent of the change if any.

Bifurcation of liability as per Schedule III Current Liability*	61.05	56.59
Non-Current Liability	296.83	179.70
Net Liability	357.87	236.29

* The current liability is calculated as expected reduction in contributions for the next 12 months.

I Risk Analysis Actuarial Risk:

It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons : Adverse Salary Growth Experience : Salary hikes that are higher than the assumed salary escalation will result into an increase in Obligation at a rate that is higher than expected.

Variability in mortality rates : If actual mortality rates are higher than assumed mortality rate assumption than the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cash flow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.

Variability in withdrawal rates : If actual withdrawal rates are higher than assumed withdrawal rate assumption than the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.

Investment Risk:

For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Liquidity Risk:

Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign/retire from the company, there can be strain on the cash flows.

Market Risk:

Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Legislative Risk:

Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/regulation. The government may amend the Payment of Gratuity Act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognized immediately in the year when any such amendment is effective.

) Compensated Absences

The charge for the current year on Statement of Profit & Loss on account of compensated absences is Rs. 46.33 lakhs (Rs. 46.36 lakhs). The said liability is provided based on actuarial valuation. The said liability is not funded.

i. Share-based Payments : (Employee Stock Option Plan - ESOP 2015)

I Opening ESOP of 1,51,700 have expired during the year. Outstanding ESOP at year end is NIL (1,51,700 shares).

. Corporate Social Responsibility Expenditure

Gross amount required to be spent by the Company during the year : Rs. 48.49 lakhs (Rs. 61.68 lakhs).

Research and Development

The company has a set up of recognized Research & Development Centre (R & D Centre) at its Kalol plant. During the current financial year, the R & D Centre has conducted activities mainly related to the product development, particularly development of new products for domestic & international markets. From previous financial year, the company has treated R & D expenditure as Revenue expenditure. Based on the Accounting Expert''s opinion obtained by the company in preceding previous year, the accounting treatment referred to above is within the purview of Indian Accounting Standard - 38 “Intangible Assets”.

Fair value hierarchy :

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value. To provide an indication about the reliability of the inputs used in determining fair value, the entity has classified its financial instruments into 3 levels prescribed under the accounting standard.

Level 1: Level 1 hierarchy includes financial instruments measure quoted prices.

Level 2: The fair values of financial instruments that are not traded in an active market are determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all the significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Valuation techniques used to determine the fair value- Level 3 :

Valuation is based on Income approach, wherein discounted cash flow method is used to capture present value of the expected future economic benefits to be derived from the ownership of particular financial instrument.

Financial Risk Management :

The company''s activities expose it to credit risk, liquidity risk, market risk, price risk & operational risk. In order to minimise any adverse effects on the financial performance, the company takes various mitigation initiatives and measures. This note explains the source of risks which the entity is exposed to and how the entity manages the risks to minimise their impact on financial statements.

Capital Management :

Risk Management

The Company manages its capital to ensure that it will be able to continue as going concern and to maximise shareholders value. The Company monitors capital using Debt-Equity ratio which is total debt divided by total equity.

For the purposes of Capital Management, the Company considers following components of its Balance sheet to manage Capital:

In view of the lockdown across the country due to the COVID-19, the Company temporarily suspended the operations in all the units in compliance with the lockdown instructions as issued by the Central and State governments. COVID-19 has impacted the normal business by way of interruption in business operations, supply chain disruption, unavailability of personnel, closure/lockdown of production facilities etc. during the lockdown period. However, production and sales/supply of goods have commenced during the month of May 2020._

The Company has performed a detailed assessments of its liquidity position and the recoverability of its assets comprising property, plant and equipment, inventories, receivables and other current assets as at the balance sheet date and on the basis of evaluation, has concluded that no material adjustments are required in the financial statements. However, the impact assessment of COVID-19 is a continuing process, given the uncertainties associated with its nature and duration. The company will continue to monitor any material changes to future economic benefits and the consequent impact on business, if any.

Figures in brackets represent previous year''s figures.

Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year’s classification/ disclosure._

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Mar 31, 2018

A. Remeasurements of Post-Employment Benefit Obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31^st March, 2017 decreased by Rs. 36.40 lakhs. There is no impact on the total equity as at 31^st March, 2017.

B. Investment in preference shares of Setco Engineering Pvt. Ltd.

The Company had investment in preference shares which were redeemable within 15 years. Under the previous GAAP, the said investments were classified as long-term investments based on the intended holding period. These investments were carried at cost less provision for other than temporary decline in the value of such investments. Under Ind AS, the said investments are considered as financial assets and classified as per the business model under which they are held. There by these investments were classified at fair value through profit or loss. This investment has been recognised at their fair value at initial recognition with a corresponding adjustment made to equity. Consequently, total equity as at 1^st April, 2016 has decreased by Rs. 789.26 lakhs. The fair value gain on account of part redemption of said investment recognised is Rs. 66.06 lakhs for the year ended 31^st March,2017. Accordingly, the profit for the year has increased by Rs. 66.06 lakhs and total equity as at 31^st March, 2017 has decreased by Rs. 723.20 lakhs.

C. Warranty provision and Commission on Sales

The company has changed the accounting policy of recognising the warranty expense at first time adoption of Ind AS from as and when the claims are admitted to recognising these expenses on estimation basis.

The Company has also changed the accounting policy of making provision for commission on sales at first time adoption of Ind AS from its consistent policy of recognising the said expenses on approval of annual accounts by the shareholders to recognising these expenses as and when related services are rendered.

Consequently, total equity as at 1^st April, 2016 has decreased by Rs. 1,053.58 lakhs. The profit for financial year 2016-17 has decreased by Rs. 136.83 lakhs and total equity as at 31^st March, 2017 has decreased by Rs. 1,190.41 lakhs.

D. Deferred Tax

Under Previous GAAP, deferred tax was accounted based on the differences between taxable profits and accounting profits for the period. Under Ind AS, entities are required to use a balance sheet approach, which is based on the temporary differences between the carrying amounts of an asset or liability in the balance sheet and its tax base. Deferred Tax shall also be created on various transitional adjustments. For transactions and other events recognised in profit or loss, any related tax effects are also recognised in profit or loss. For transactions and other events recognised outside profit or loss (either in other comprehensive income or directly in equity), any related tax effects are also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively). Consequently, deferred tax assets (net) for financial year 2016-17 have increased by Rs. 27.76 lakhs. The total equity has been increased by Rs. 676.73 lakhs as at 31.03.17.

E. Financial Instruments

Certain Financial Assets and Liabilities i.e. Bank Deposits, Loans to subsidiaries, GEB Deposit, Bank Term Loans and related transaction costs are subsequently measured at amortised cost. Further, deemed investment in equity of subsidiaries in form of financial guarantees are bein adjusted against guarantee commission charged by the company. This guarantee commission was disclosed as other income under previous GAAP while Ind AS requires it to adjust it against deemed investment. Consequently, the profit for financial year 2016-17 has decreased by Rs. 20.02 lakhs and total equity decreased by Rs. 44.94 lakhs as at 31.03.2017.

F. Government Grants

Under Previous GAAP, the cash subsidy received from government was disclosed as Capital Reserve. Under Ind AS, the government grants need to be determined as asset related or income related. Asset related grants need to be amortized over a period of useful lives of related assets and need to be disclosed as Non-current liability until it is completely amortised. Consequently, at the Transition Date, the subsidy was recognised as asset related and is treated as non-current liability and amortized over a period of useful lives of related assets. Consequently, the Profit for financial year 2016-17 has increased to the extent of Rs. 1.42 lakhs on account of its amortization and the total equity has decreased by Rs. 17.47 lakhs as at 31^st March, 2017 on account its reclassification as non-current liability.

G. Others

Under the previous GAAP, the cost of equity- settled employee share-based plan was recognised using the intrinsic value method. Under Ind AS, the cost of equity settled share-based plan is recognised based on the fair value of the options as at the grant date. Under the Previous GAAP, Financial Guarantee given was disclosed as a Contingent Liability. Under Ind AS, Financial Guarantee Contracts extended by the Company are considered as Deemed Equity investment and are measured at initial recognition at Fair Value. Consequently, at the Transition Date, a Financial Guarantee Investment Asset was recognised of the value Rs. 1,056.48 lakhs and the corresponding value is treated as Financial liability under the head “Other Financial Liabilities”. Under Ind AS, Finance lease income/expense is to be recognised on unwinding of lease obligations. Consequently, the Profit for financial year 2016-17 has increased by Rs. 8.50 Lakhs and T otal Equity has increased by Rs. 6.97 lakhs as at 31^st March, 2017.

H. Other comprehensive income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ consist of remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP. Consequently, the other comprehensive income has increased by Rs. 44.96 lakhs (net of deferred tax) on account of remeasurement of defined benefit plans for the year ended 31^st March, 2017.

I. Reversal of Revaluation Reserve on Financial Lease:

Under previous GAAP, leasehold land was disclosed as fixed asset at revalued figures. Under Ind AS, Leases are to be classified as operating or finance lease based on substance of arrangement. Accordingly, at the Transition Date, the company has classified leasehold land as finance lease. Under Ind AS, the finance lease is recognised at lower of fair value and PV of minimum lease payments over a period of lease discounted at appropriate rate. The direct costs incurred for the purpose of lease are to be added to the minimum payments. Accordingly, the company has fair valued the lease and excess revaluation reserve has been eliminated. Consequently, the total equity has decreased by Rs. 10.39 lakhs as at 31.03.2017.

J. Proposed Dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs. 1,286.35 lakhs (inclusive of dividend distribution tax of Rs.217.58 lakhs) as at 1^st April, 2016 included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity as at 1^st April, 2016 increased by an equivalent amount. The said dividend has been paid in the financial year 2016-17.

1.1 Explanation 4 - Impact on Cash Flows for the year ended 31^st March, 2017

There are no material impacts in cash flows due to transition to Ind AS.

Notes: -

1. During the F.Y-2014-15, the company based on external technical evaluation, reassessed the remaining useful lives of Property, Plant & Equipment from 1^st April, 2014. Accordingly, the useful lives of Property, Plant & Equipment required a change from previous estimates. w.e.f 1^st April, 2014, the company has charged depreciation based on the revised useful lives of Property, Plant & Equipment. The estimated lives of Property, Plant & Equipments adopted are different from those prescribed under schedule II of the act and have been determined based on technical advice obtained from external experts.

2. The Gross Block of Property, Plant & Equipment include Rs. 2,708.72 lakhs on account of revaluation of Land & Buildings based on report issued by the External Valuers in March, 2013.

3. Product development being item of technical nature, auditors have relied on the management representation.

4. Intangible assets under development, inter alia includes qualifying expenses Including Depreciation of Rs.89.83 lakhs (Previous Year Rs. 99.73 lakhs) incurred on product development activities carried out in in-house R & D Centre. (Refer Note no - 48)

5. Adjustment in “Intangible Asset Under Development” represents transfer to “Product Development” under the head Intangible Assets, of those items whose commercial production has commenced during the year.

- Investments in other related entities, then Holding company, Subsidiaries/Joint Venture have been made in terms of investment limits approved by Board of Directors of the company from time to time.

- The Company has entered into a joint venture agreement with Lingotes Especiales, Spain to establish a Foundry Project in Lava Cast Private Limited. The Company holds 86.12% Equity shares as on 31^st March, 2018 in this joint venture and accordingly Lava Cast Private Limited has been reported as subsidiary company in financial statements.

- As per Legal Experts’ opinion obtained by the Company on its investment (along with Corporate Guarantee extended to the Bankers of investee company) in F.Y.2013-14, Lava Cast Private Limited qualifies to be treated as both, Subsidiary and Joint Venture for legal purposes and the Company’s exposure in Lava Cast Private Limited is in compliance with the provisions of Sections 185 & 186 of the Companies Act, 2013 and relevant Rules prescribed there under.

- For detailed investment strategies, Refer Note No. 46.

* This investment in 0% Redeemable Preference Shares is, in substance investment in Equity instruments based on terms of the said instruments and hence treated accordingly at Deemed Cost.

** Setco Engineering Private Limited Ceased to be holding company w.e.f. 19^th March, 2018

a. Pursuant to the approval of members in the Annual General Meeting held on 28^th September, 2015 the equity shares of face value of Rs. 10/- each have been subdivided into equity shares of face value of Rs. 2/- each with effect from 17^th December, 2015. As a result, the number of equity shares has increased from 2,67,19,335 to 13,35,96,675 shares. Accordingly, the number of shares has been adjusted for all the periods presented.

b. The company has only one class of equity shares having a par value of Rs. 2 per share. Each shareholder of equity share is entitled to one vote per share.

c. The company declares and pays dividends in Indian rupees. The board of directors in their meeting held on 23rd May, 2018 have proposed dividend of Rs.0.80 per share for financial year ended 31st March, 2018. The proposed dividend is subject to the approval of the shareholders at the ensuing Annual General Meeting. The total dividend appropriation would amount to approximately Rs.1,288.50 lakhs including corporate dividend tax of Rs. 219.73 lakhs

d. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

- Indian rupee term loan from Bank of Baroda is repayable in 16 quarterly instalments each of Rs. 240.00 lakhs to be repaid by November, 2019. The loan is secured by first pari passu charge on company’s fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security.

- Indian rupee corporate loan from Bank of Baroda is repayable in 16 quarterly instalments each of Rs. 312.50 lakhs to be repaid by August, 2019. The loan is secured by first pari passu charge on company’s fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Non-Executive Director of the Company.

- Indian rupee term loan from IDBI Bank is repayable in 16 quarterly instalments each of Rs. 62.50 lakhs to be repaid by January 2020. The loan is secured by first pari passu charge on company’s fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Non-Executive Director of the Company.

- Indian rupee term loan from Bank of Baroda Bank is repayable in 16 quarterly instalments each of Rs. 141.00 lakhs to be repaid by September, 2022. The loan is secured by first pari passu charge on company’s fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, Non-Executive Director of the Company.

- Indian rupee vehicle loan from Daimler Financials Services India Pvt. Ltd. is repayable in 36 EMI each of Rs. 1.55 lakhs to be repaid by February, 2019. The loan is secured by hypothecation of particular vehicle.

- Indian rupee vehicle loan from Axis Bank is repayable in 36 EMI each of Rs. 0.97 lakhs to be repaid by July, 2019. The loan is secured by hypothecation of particular vehicle.

- Indian rupee vehicle loan from ICICI Bank is repayable in 60 EMI each of Rs. 1.01 lakhs to be repaid by December, 2022. The loan is secured by hypothecation of particular vehicle.

- Indian rupee term loan from Yes Bank is against personal guarantee of Chairman and Managing Director and Mr. Udit Sheth, NonExecutive Director of the Company. The loan is repayable in 4 six monthly installment each of Rs. 500.00 lakhs to be repaid by April, 2020.

- The amount appearing in the non-current portion as on the respective reporting date are exclusive of loan classified under Current maturities of long term borrowing disclosed under Note no. 23.

- Mr. Udit Sheth has been re designated from Joint Managing Director to Non-Executive Director w.e.f. 9th March, 2018.

- Working Capital Loans are secured by first charge by way of hypothecation of current assets including stocks, book debts etc. and second charge on entire fixed assets of the company on pari passu basis.

- Unsecured loan is from Tata Capital Financial Services Limited.

This information as required to be disclosed under Micro Small and Medium Enterprise Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. Information in terms of Section 22 of Micro, Small and Medium enterprises Development Act, 2006 are given below:

‘Provision is made for estimated warranty claims at discounted amount in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled as per Warranty Policy. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest future claims could differ from historical amounts.

*Pursuant to the Central Government Notification No. F.No.10(1)/2017-DBA-11/NER dated 05^th October, 2017, the company has recognised Rs. 549 lakhs as income being eligible reimbursement of CGST/IGST for its unit situated in Uttarakhand. The Company has further recognised Rs. 398 lakhs as income being reimbursement of IGST/CGST share of State for the said Uttarakhand unit pending notification of incentives by the State Government. The Company believes, the issuance of notification for GST benefits by the State Government is certain based on the notification already issued by the Central Government. The Company shall lodge its formal claims after issue of notification by the State Government.

2. MAT CREDIT

During the year, company has recognized MAT Credit of Rs. 48.38 lakhs for current financial year (Previous year Rs. 67.73 lakhs) and same is shown as adjustment from the current tax amount in the statement of profit and loss. The company has also recognised reversal of Net MAT credit of Rs. 41.98 lakhs (Rs. 13.04 lakhs) in respect of previous periods.

Pursuant to the approval of members in the Annual General Meeting held on 28th September, 2015, the equity shares of face value of Rs. 10/- each have been subdivided into equity shares of face value of Rs. 2/- each with effect from 17th December, 2015. As a result, the number of equity shares has increased from 2,67,19,335 to 13,35,96,675 shares. The earning per share for all the periods presented has been restated accordingly in terms of Indian Accounting Standard - 33 “Earning Per Share” notified u/s 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015. Earning per share is calculated after considering weighted average number of shares that would be issued on the conversion of dilutive potential equity shares.

3. SALES-IN-TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of financial statements amounts to Rs. 145.09 lakhs (Rs. 156.04 lakhs). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs. 121.98 lakhs (Rs. 121.35 lakhs) is shown under the head “Finished Goods” in Note 8 under the head “Inventories”.

*The members of the company in Annual General Meetings held on 9th September, 2014 & 27th September, 2017 passed Special Resolutions for appointment of Mr. Harish Sheth as Chairman & Managing Director for a period of three years w.e.f 01.01.2015 & 01.01.2018 respectively. The minimum remuneration approved by the members in the said meetings is Rs. 120.00 lakhs (Rupees One Crore Twenty Lakhs) per annum. In pursuance of said special resolutions passed by the members and in view of inadequacy of profits in F.Y. 2017-18, the Chairman & Managing Director has been paid remuneration within the limits laid down under Part-II of Schedule V of the Companies Act, 2013.

4. Disclosure under section 186 (4) of the companies act, 2013

Details of Investments made, loans and corporate guarantee given in respect of subsidiaries are presented at Note no. 3, 4, 12, 13, 18, 23, 37 and 38. Loans and corporate guarantees given are for Business purpose of Subsidiaries.

5. Segment information

The Company is operating only in one business segment viz. Auto Components.

6. Contingent Liabilities and Commitments

A. Contingent Liabilities:

i. Guarantees given by the bank on behalf of the Company Rs.51.69 lakhs (Rs. 114.92 lakhs).

ii. Guarantee given for maximum £ 0.80 million to Bibby Financial Services, U.K. (£ 1.40 million to ICICI Bank Limited, U.K.) for wholly owned ultimate foreign subsidiary’s credit facilities Rs. 742.00 lakhs (Rs. 1,140.30 lakhs). The carrying amounts of related financial guarantee contracts recognised in books of account are Rs. 0.78 lakhs as at 31.03.2018 (Rs. 4.89 lakhs)

iii. Guarantee given for maximum $ 3.20 million ($ 4.00 million) to Bank of Baroda, New York, USA for wholly owned ultimate foreign subsidiary’s credit facilities Rs. 2,089.60 lakhs (Rs. 2,607.60 lakhs). The carrying amounts of related financial guarantee contracts recognised in books of account are Rs. 19.53 lakhs as at 31.03.2018 (Rs. 20.86 lakhs)

iv. Guarantee given for maximum Rs. 18,326.00 lakhs (Rs. 18,326.00 lakhs) to Bank of Baroda, Mumbai, India, for subsidiary’s credit facilities. The carrying amounts of related financial guarantee contracts are recognised in books of account Rs. 968.86 lakhs as at 31.03.2018 (Rs. 1,059.14 lakhs)

B. Note on Pending Litigation:

i. The Pollution control department had filed a civil /criminal case against the company and all the Directors in 1993. The civil matter was disposed in favour of the company.

In criminal matter against the company and the directors, Hon. High Court had quashed the case against all the nominee directors. The case will now proceed against the company and the managing director in local court.

ii. The Company had filed a case against a competitor for cancellation of registration of design granted by Controller of Patents and Designs in Kolkata High Court. In view of the settlement of differences under a consent terms, the said case became infructuous, and the process of withdrawal of the case is under process.

iii. The Company has preferred an appeal against an order issued by CIT (A)-4 Vadodara confirming penalty of Rs. 12.01 lakhs for A.Y. 2004-05 with ITAT (Tribunal). The company is confident of receiving adjudication in its favour.

iv. The company has received order from A.O. Panchmahals, Godhra range for demand of Rs. 590.13 lakhs by way of adjustment of addition in book profit for calculation of tax under MAT which resulted into the above demand for Assessment Year 2011-2012. The company has preferred an appeal with CIT(A) - 4 Vadodara against such order. The company is confident of receiving adjudication in its favour.

v. The company has preferred an appeal with CIT (Appeals)-Vadodara for A.Y.-2013-14 and 2014-15 for disallowance of depreciation on product development amounting to Rs.86.83 lakhs & Rs.158.22 lakhs for A.Y. 2013-14 & 2014-15 respectively. No demand is raised as company pays tax u/s. 115JB (MAT), but MAT Credit is reduced in the order. The company is confident of receiving adjudication in its favour.

vi. The company has received intimation u/s 143(1) of Income Tax Act,1961 from CPC, Bengluru wherein demand of Rs. 394.48 lakhs has been raised mainly on account of non allowance of deduction u/s 80-IC. The company believes this is a mistake apparent from records and is in process of filing rectification petition u/s 154 of Income Tax Act, 1961. The company is confident that the demand would be dropped in due course of time.

The company’s management reasonably expects that these cases when ultimately concluded / adjudicated will not have any material or adverse effect on the company’s results or the operations or financial condition.

C. Commitments:

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 232.30 lakhs (Rs. 300.33 lakhs).

7. Trade payable and receivables

Trade payables’ balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of trade receivables and other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

8. Employee benefits

Disclosure pursuant to Ind AS - 19 “Employee Benefits”

i. Defined Contribution Plans

An amount of Rs 234.07 lakhs (Rs. 230.60 lakhs) (Provident Fund & ESIC) is recognized as an expense and included in Note 31 under the head “Employee Benefits”.

ii. Gratuity - long term defined benefit plan

In accordance with the Payment of Gratuity Act of 1972, the Company contributes to a defined benefit plan (the “Gratuity Plan”) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, disability or termination of employment being an amount based on the respective employee’s last drawn salary and the number of years of employment with the Company.

A description of methods used for sensitivity analysis and its Limitations:

Sensitivity analysis is performed by varying a single parameter while keeping all the other parameters unchanged. Sensitivity analysis fails to focus on the interrelationship between underlying parameters.

Hence, the results may vary if two or more variables are changed simultaneously.

The method used does not indicate any thing about the likelihood of change in any parameter and the extent of the change if

* The current liability is calculated as expected reduction in contributions for the next 12 months. i) Risk Analysis Actuarial Risk:

It is the risk that benefits will cost more than expected. This can arise due to one of the following reasons:

Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in Obligation at a rate that is higher than expected.

Variability in mortality rates : If actual mortality rates are higher than assumed mortality rate assumption than the Gratuity Benefits will be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cash flow will lead to an actuarial loss or gain depending on the relative values of the assumed salary growth and discount rate.

Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption than the Gratuity Benefits will be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.

Investment Risk:

For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Liquidity Risk:

Employees with high salaries and long durations or those higher in hierarchy, accumulate significant level of benefits. If some of such employees resign / retire from the company, there can be strain on the cash flows.

Market Risk:

Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Legislative Risk:

Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the legislation/regulation. The government may amend the Payment of Gratuity Act thus requiring the companies to pay higher benefits to the employees. This will directly affect the present value of the Defined Benefit Obligation and the same will have to be recognized immediately in the year when any such amendment is effective.

(iii) Compensated Absences

The charge for the current year on statement of Profit & Loss on account of compensated absences is Rs. 25.19 lakhs (Rs. Nil lakhs). The said liability is provided based on actuarial valuation. The said liability is not funded. The charge of Rs.Nil lakhs (Previous year Rs.34.20 lakhs has been reversed during the current financial year mainly on account of benefits paid.

9. Share-based Payments: (Employee stock option plan - ESOP 2015)

a. Pursuant to approval of shareholders at their meeting held on May 30, 2016, the Company has established an ‘Employee Stock Option Scheme 2015’ (‘ESOP 2015’ or ‘the Scheme’) to be administered by the Nomination & Remuneration Committee of the Board of Directors.

b. Under the Scheme, options not exceeding 610,000 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest not less than one year before and not more than four years after the date of grant of the options. The options granted to the employees would be capable of being exercised within a period of one year from the date of vesting.

c. The exercise price of the option is Rs. 16/- per Option which is at discount of Rs. 15.95 from the closing market price of the shares on the Stock Exchange as on the date prior to the date of the Nomination & Remuneration Committee resolution approving the grant.

d. Pursuant to the above-mentioned scheme, the Company has, during the year, granted 4,35,000 (Previous year 6,10,000) options vesting over a period of three years commencing from the date of grant.

e. The following are the number of options outstanding during the year:

f. The above outstanding options comprise of only one class granted to eligible employees in category of senior management.

g. The company follows the fair value method of accounting for the options. (Rs. In Lakhs)

h. Notes / Assumptions:

Valuation method for share options granted to employees, in many cases market prices are not available, because the options granted are subject to terms and conditions that do not apply to traded options. If traded options with similar terms and conditions do not exist, the fair value of the options granted shall be estimated by applying a Black Scholes option pricing model. The inputs to the model are:

- Underlying price of the shares as on the date of grant

- Exercise price of the options

- Expected life of the options

- Expected volatility of the options

- Expected dividend yield of the option

- Risk free rate of interest

Valuation basis

Underlying price of the shares as on the date of grant

Since the shares of the company are listed on BSE, the closing price one day prior to the grant date 30^th May, 2016 which is INR 31.95 has been considered.

Exercise price of the options

The exercise price is Rs. 16/- per option

Expected life of the options

The expected life of the option is assumed to be half way into the exercise period from the vesting date as all the options are likely to be exercised.

Expected volatility of the options

The shares of the company are listed and hence the closing prices from 1st April, 2014 to 31st March, 2018 have been used to work out the average volatility of returns. It works out to 19.39% per annum.

Expected dividend yield of the option

The dividend yield has been taken from the BSE data and the average dividend yield has been worked out by giving higher weights to the recent years.

Risk free rate of interest

The risk-free discount rate assumed is equivalent to the average term of the option. The interest rate on the government bonds with equivalent term is approximately 7.1% per annum. Hence, same is used for the calculation

Attrition rate

Since the underlying price of the option is significantly higher than the exercise price, it is assumed that all the options will be exercised as on the respective vesting dates. Attrition rate per annum is assumed to be 10% p.a.

Mortality rate

Since the term of the option is less than 3 years, mortality rates are not considered in the valuation.

Valuation results

The fair value of each option as on the valuation date is dependent on the expected life of the options and is as given below:

The total cost of the options granted, if all the outstanding shares are vested and exercised is Rs. 71.93 lakhs. However, it is expected that all the options will not be vested. Hence, total cost of options based on an attrition rate of 10% per annum works out to Rs. 67.37 lakhs.

10. Investment Strategies:

i) Over a period, considering the Company’s growth prospects and overall economic scenario from time to time, necessitating building strength to withstand the challenges, the Company initiated / followed strategies to integrate, expand the base and diversify. In the process, the Company not only invested in Capex, but also ventured into inorganic developments by investments made into subsidiaries/joint ventures and related entities. These investments may not directly give returns in short term on year to year basis but will contribute to the Company, long term enduring benefits which will be reflected in growth in top and bottom line of the company.

1. Rs. 507.60 lakhs (Rs. 507.60 lakhs) Invested in equity and preference share of WEW Holdings Limited (Mauritius) a Wholly Owned Foreign subsidiary to oversee global investments.

2. Rs. 1,691.83 lakhs (Rs. 1,691.83 lakhs) Invested in Equity shares of Setco Automotive (UK) Limited Wholly Owned Ultimate Foreign Subsidiary a T echnical know How and development Hub of the group for domestic and international markets.

3. Rs. 8,359.00 lakhs (Rs. 5,315.50 lakhs) Invested in Equity shares of Lava Cast Private Limited a Subsidiary established as a backward integration project to augment the supply of critical casting components. The Company has entered in to joint venture agreement with Lingotes Especiales S.A. Spain.

4. Rs.1,535.00 lakhs (Rs. 1,535.00 lakhs) Invested in Equity shares of SE Transstadia Private Limited, a Unique and State of the Art Sports Infrastructure Project with the latest modern Technology, a first of its kind project in India.

5. Rs. Nil lakhs (Rs. 3,465.00 lakhs) Invested in preference shares of Setco Engineering Private Limited (then Holding Company), predominantly an Investment Company which has been redeemed at par during the year.

6. The company has formed a 100% subsidiary in UAE in the name of Setco MEA DMCC. The said subsidiary’s equity capitalisation has not been done as at 31.03.2018. The said subsidiary has commenced its operations during the year.

i. The Company has invested Rs. 2,199.43 lakhs (Rs.2,199.43 lakhs) in Equity & Preference shares of wholly owned ultimate foreign subsidiaries and also has outstanding receivables in form of loans & advances and debts (net) aggregating Rs. 7,178.59 lakhs (Rs.5,671.72 lakhs) from them as at 31.03.2018. Apart from company’s direct investments into these wholly owned ultimate foreign subsidiaries referred to above, the company’s ultimate wholly owned subsidiary, M/s Setco Automotive (UK) Ltd has an exclusive investment of Rs. 1,342.90 lakhs into equity shares of its step down wholly owned subsidiary, M/s. Setco Automotive (N.A.) Inc. These wholly owned ultimate foreign subsidiaries incurred consolidated accumulated losses of Rs. 2,884.60 lakhs (Rs. 2,404.48 lakhs) as at 31.03.2018 resulting into erosion of fair portion of their consolidated net worth. The management is of the opinion that this is a temporary phase considering business plans, future projected profitable operations, asset base, the investment being strategic in nature, going concern basis and solvency of subsidiaries supported by the Parent company (i.e. Setco Automotive Ltd), no provision is required to be made for diminution in value of these investments made in, loans & advances & debts due from the said subsidiaries and they are considered good. The carrying value of company’s investment in equity & preference shares is also supported by valuation report of Independent Chartered Accountant.

ii. The company has in earlier years invested Rs. 1,535.00 lakhs in 30,70,000 equity shares of SE Transtadia Pvt Ltd., a sports and entertainment Infrastructure company. The said company has completed the project and has commenced commercial operations in March 2017. The company has accumulated loss of Rs. 1,768.86 (Rs. 1,236.18 lakhs) as per latest audited financial statements as at 31.03.2017. In the opinion of the management, this investment is strategic in nature which has long term perspective and has comparatively long gestation period. This situation being a temporary phase and considering future business plans, assets base and other developments, despite accumulated losses, the management firmly believes that there is no erosion in value of its investment in said related entity. The carrying value of investment in equity shares of said related entity is also supported by valuation report obtained from independent Chartered Accountant.

iii. The company has invested Rs. 8,359.00 lakhs (Rs. 5,315.50 lakhs) in 8,35,90,000 (5,31,55,000) equity shares of Rs. 10/- each in its partly owned subsidiary Lava cast Pvt Ltd. The company’s second year of commercial production ended on 31st March,2018 resulting in accumulated loss of Rs. 4,659.36 lakhs (Rs. 2,281.99 lakhs). The management is of the opinion that this being a temporary phase and company is in the initial years of operations and considering the future business plans, assets base etc., no provision is required to be made for diminution in the value of this investment made in the said subsidiary. The carrying value of company’s investment in equity shares of said related entity is also supported by valuation report obtained from independent Chartered Accountant.

11. Corporate social responsibility expenditure:

a. Gross amount required to be spent by the Company during the year: Rs. 63.53 lakhs (Rs. 57.79 lakhs)

b. Amount spent during the year on:

*Includes Contribution to a trust controlled by the Company (Setco Foundation) in relation to CSR Expenditure: Rs. 87.50 lakhs (Rs. 75.44 lakhs)

12. Research and development

The company has a setup of recognized Research & Development Centre (R & D Centre) at its Kalol plant. During the current financial year, the R & D Centre has conducted activities mainly related to the product development, particularly development of new products for domestic & international markets. The qualifying product development expenses of the said R & D Centre which satisfy recognition criteria for intangible asset as set out in Indian Accounting Standard - 38 “Intangible Asset” are capitalized by the company as Intangible Asset and is included under the head “Intangible Asset under development in Note no. 2 - “Property, Plant & Equipment” and the same shall be amortised as per amortization policy consistently followed by the company. Based on the Accounting Expert’s opinion obtained by the company in preceding previous year, the accounting treatment referred to above is within the purview of Indian Accounting Standard - 38 “Intangible Assets”.

(ii) Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value. To provide an indication about the reliability of the inputs used in determining fair value, the entity has classified its financial instruments into 3 levels prescribed under the accounting standard.

Level 1: Level 1 hierarchy includes financial instruments measure quoted prices

Level 2: The fair values of financial instruments that are not traded in an active market are determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all the significant inputs required to fair value an instrument are observable, the instrument is included in level 2

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

(iii) Valuation techniques used to determine the fair value- Level 3

Valuation is based on Income approach, wherein discounted cash flow method is used to capture present value of the expected future economic benefits to be derived from the ownership of particular financial instrument.

13. Financial Risk Management:

The company’s activities expose it to credit risk, liquidity risk, market risk, price risk & operational risk. In order to minimise any adverse effects on the financial performance, the company takes various mitigation initiatives and measures. This note explains the source of risks which the entity is exposed to and how the entity manages the risks to minimise their impact on financial statements.

14. Capital Management:

Risk Management

The Company manages its capital to ensure that it will be able to continue as going concern and to maximise shareholders value. The Company monitors capital using Debt-Equity ratio which is total debt divided by total equity.

For the purposes of Capital Management, the Company considers following components of its Balance sheet to manage Capital:

Total equity includes Share Capital and Other Equity (Free Reserves). Total Debt includes current debt plus non-current debt.

15. During the year, the company has made contribution of Rs. 10.00 lakhs (Rs. Nil lakhs) to Political party - Bhartiya Janta Party.

16. Figures in brackets represent previous year’s figures.

17. Previous year’s figures have been regrouped/ reclassified wherever necessary to correspond with the current year’s classification/ disclosure.

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Mar 31, 2016

1. Pursuant to the approval of members in the Annual General Meeting held on 28^th September, 2015 the equity shares of Face value of Rs. 10/ each have been subdivided into equity shares of face value of Rs. 2/- each with effect from 17th December, 2015. As a result, the number of equity shares has increased From 2,67,19.335 to 13,35.96,675 shares. Accordingly the number of shares has been adjusted for all the periods presented.

2. The company has only one cess of equity shares having a par value of Rs. 2 per share. Each shareholder of equity share is entitled to one vote per share.

3. The company declares and pays dividends in Indian rupees, the board to directors m their meeting herd on 30th May. 2015 have proposed dividend of Rs. 0.90/- per share for financial year ended 31st March. 2016. The proposed dividend is subject to the approval of the share holders at the ensuing Annual General Meeting The total dividend approbation for the year ended 31st March. 2G16 would amount to approximately Rs 12,86,35,052/-including corporate dividend tax of Rs.2,17,57,712/-

4. In the event of liquidation of the company, the holders or equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

5. Investments in other related entities. Holding company. Subsidiaries/Joint Venture have been made in terms of investment limits approved by Board of Directors of the company from time to time.

6. Based on the legal opinion obtained by the company from legal expert on its eligibility to make Further investments in holding company u/s 19(1) of Companies Act. 2013. the company has during the year Further subscribed to 19% 15 years nor-cumulative compulsorily redeemable preference shore in setco Engineering Put Ltd , holding company.

7. The Company has entered into a joint venture agreement with Lingotes Especiales, Spain to establish a Foundry Project in Lava Cast Private Limited The Company holds 8l.67% Equity shares as on 31st March. 2016 in this joint venture and accordingly Lava Cast Private Limited has been reported as subsidiary company in Financial statements.

8. As per Legal Experts opinion obtained by the Company on its investment (along with Corporate Guarantee extended to the flankers of investee company) in preceding financial year , Lava Cast Private Limited qualities to be treated as bath, Subsidiary and Joint. Venture tor legal purposes and the Company''s exposure In Lava Cast Private Limited is in compliance with the provisions of Sections 185 & 186 of the Companies Act, 2013 and relevant Rules prescribed there under

9. During the year the company has further invested Rs. 10,50,00,000 in 21,00,000 equity shares of Rs. 10 each at a price of Rs. 50 per share (including premium of Rs. 40/- per share) or SE Transstadia Private Ltd, The said investment was made at a price which is reasonable based on the equity share valuation report of Investee Company issued by an independent chartered accountant.

10. For detailed investment strategies. Refer Note No. 43 (i) and (ii).

11. MAT Credit

During the year, company has recognized MAT Credit of Rs 1.47,36,195/- for current financial year (Previous year Hs. 9Jl.E4.967y- ] and Rs. NIL [Previous year Rs. 16,20,432/ ] in respect of previous periods and same is shown as adjustment from the current tax amount in the statement of profit and loss The company has also recognized reversal of Net MAT credit of Rs. 76.790/- (Rs Nil) in respect of previous periods.

Pursuant to the approval of members m the Annual General Meet mg held on 28th September 2015. the equity shares of fact- value of Rs. 10/- each have been subdivided Into equity shares of lace value of Rs. 2/- each with affect From T7th December, 2015. As a result, the number of equity shares has increased From 2,67.19.335 to 13,3:136,675 shares. The earnings per share for all the pencils presented his been restated accordingly in terms of Accounting Standard - 20 ‘Earning Per Share" specified u/s 133 of the Companies Act, 2013 read with Rule 7 of the Companies E Accounts) Rules, 2014.

12. SALES- IN- TRANSIT

The Products dispatched from the factory- which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of Financial statements amounts to Rs. 1,64,82,931/- Rs. 3,18,80,276/-3 With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs. 1,28,62,783/- (Rs. 2.66,35,212/-) is shown under the head "finished Goads'' in Note 14 under the head "inventories".

13. CONTINGENT LIABILITIES & COMMITMENTS

14. Contingent Liabilities::

15. Guarantees given by the bank on behalf of the Company Rs. 1,12,32.290/ (Rs. 1,07,93,361/'').

16. Guarantee given for E 1.40 million [£ 1 40 million) to ICIC Bank Limited, U.K. for Wholly Owned Ultimate Foreign Subsidiary’s credit facilities Rs. 13,37,99,000/-(Rs;. 13,04,66,000/-).

17. Guarantee given for $ Nil ($ 0.65 million) to ICICI Bank limited, Singapore for Wholly Owned Ultimate Foreign Subsidiary’s credit facilities Rs. Nil (Rs. 4,09,69,500/-)

18. Guarantee given for $ 4.00 million (S 4.00 million) to Bank of Baroda, New York. USA for Wholly Owned Ultimate Foreign Subsidiary''s credit f facilities Rs. 26, 64,00,000-/ Rs. 25,21,20,000/-).

19. Guarantee given for Rs. 1,83,26.00,000/ (Rs. 1,17.05.00.000/-) to Bank of Berode, Mumbai. India, for Indian subsidiary''s credit facilities.

20. Warranty Claims raised by Customer but not acknowledged as debt Rs. 1,13.93.63 7/- Rs. 1,64.41,563/’),

21. Note on Pending litigation :

22. The Pollution Control Department had filed a Civil / Criminal case against the Company and all the Directors in 1903. The Civil matter was disposed In favour of the Company,

In criminal matter against the Company and the Directors, Hon. High Court had quashed the case against all the Nominee Directors, The case will now proceed against the Company and the Managing Director in Local Court.

23. The Company had Filed a case against a competitor For cancellation of registration of design granted by Controller of Patents and Designs in Kolkata High Court, In view of the settlement of differences under a consent terms, the said case became anfractuous, and the process of withdrawal of the case is under process.

24. The company has preferred an appeal to Deputy commissioner of sales tax Gujarat. Vadodara against the order of Commercial tax Officer imposing penalty of Rs. 10,88,178 /- which is paid and disclosed under the head short term loans and advances. I he company is confident of receiving adjudication in its favour.

25. The Company has preferred an appeal against en order issued by DCIT. Godhra imposing, penalty of Rs.12,01,090/- For A.Y 2004-05 to CFT(A) -4 Vadodara. The company is confident of receiving adjudication in its favour

26. The company had preferred an appeal to CIT (A) for assessment years 2002-03. 2003-4. 2004-O5,2005-06,2006-07 and 2007-08 wherein company has received adjudication m their favour However, the department has preferred appeals for the above assessment years at I TAT (Tribunal) Dm of which appeals of revenue For A.Y 2002-03 and2D07 D6 are dismissed and adjudication is received in company''s favour.

27. The company has preferred an appeal to ITAT against the order issued by CFT(A) For A.Y 2010-11 raising demand of Rs. 16.520/- against the valuation of stock, the company is confident of receding adjudication in its favour:

The Company''s Management reasonably expects that these cases when ultimately concluded/adjudicated will not have any material or adverse effect on the Company''s results or the Operations or financial condition.

28.. Commitment:

29. Estimated amount of contracts remaining to be executed on capital account and not provided far Rs. 3.10,30,060/- [Rs. 5,97,37,347/-),

30. TRADE PAYABLES & RECEIVABLES

31. Trade payables'' balances are under reconciliation process. Necessary adjustments, if any. will be accounted when the same is reconciled, in respect of Trade receivables and other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

32. in the opinion of the management, current and noncurrent assets are recoverable in the normal! course of business.

33. Employed Stock Option Plan - ESOP £010.

The members of the Company in September 2010 approved grant of equity shares under "Setco Automotive L united F employee Stock Option Scheme 2010". which was framed in accordance with Securities and Exchange Board of India (Employee Stock option Scheme end Employee Stock Pui''chase Scheme) Guidelines. 1999 as emended from time to time. The said scheme ceased during preceding previous year.

34. Investment Strategies :

35. Over a period, considering the Company''s growth prospects and overall economic scenario from time to time, necessitating building strength to Withstand the challenges, the Company initialed/ followed strategies to integrate, expand the base and diversify. In the process, the Company not only invested in Capex, but also ventured into inorganic developments by investments made into subsidiaries/point ventures and related entities. Those investments may not directly give returns in short term on year to year basis but will contribute to the Company, long term enduring benefits which will be rejected m growth in top and bottom line of the company.

36. Rs. 5,07,53,533/- (Rs,5.07,59,533/-) Invested in equity and preference shore of WEW holdings Limited {Mauritius) a Wholly owned Ultimate Foreign subsidiary to oversee global investments.

37. Rs. 0,48,40.000/- (Rs.5,07,59,533/-) Invested in Equity shares of Setco Automotive EUJG Limited a Technical know How and development Hub a f the group for domestic and maturational mattes.

38. Rs.41,65,50 ,000/- [Rs.25,00,50,000/ Unvested in Equity shares of Lava Cast Private Limited a Subsidiary established as a backward integration project to augment the supply of critical casting components. The Com pan/ has entered in to joint venture agreement with Lingotes Especiales S. A. Spain.

39. Rs. -15,95.00,000/-(Rs. 4,85,00,000/-) Invested in Equity shares of SE Transstadia Private Limited, a Unique and State of the Art Sports Infrastructure Project with the latest modern Technology, a first at its kind project in India.

40. Rs. 42,65.00.000/-(Rs. 40.35.00.000/- Invested in preference shares of Setco Engineering Private Limited-Holding Company, predominantly an Investment Company. The said Investment in Preference Shares has yielded reasonable tax free returns to the company on year to year basis.

41. The Company has invested Rs. 11,35.93,533/ in Equity S Preference shares of wholly owned ultimate Foreign subsidiaries and also has outstanding receivables in Form of loans & advances and debts (net} aggregating Rs. 64,03,46,206/'' From them as at 31.03.2016. Apart From companies, direct investments into these wholly owned ultimate foreign subsidiaries referred to above, the company''s ultimate wholly owned subsidiary. M/s Setco Automotive (UK) Ltd l-as an exclusive investment of Rs. S.46.05,0GO/- (US S 15,00,000/- invested in F. Y 2006-07) into equity shares of its step down wholly owned subsidiary, M/s. Setco Automotive [N. A.) Inc. These wholly owned ultimate foreign subsidiaries incurred consolidated accumulated losses of Rs. 12,34,12,067/- as at 31.03.2016 resulting into erosion of fair portion of their consolidated net worth. The management is of the opinion that this is a temporary phase considering various efforts being made to restructure/streamline the operations of the wholly owned ultimate foreign subsidiaries, more particularly in case of M/s. Setco Automotive (UKJ Limited, which is the major contributory subsidiary for consolidated accumulated losses. These being strategic investments made with a very long term perspective and also in view of the asset base, business plans and projected profitable operations of the wholly owned ultimate foreign subsidiaries, in the opinion of the management, no provision is required to be mode For diminution in value of these Investments made in. loans & advances & debts due from the said subsidiary and they are considered good.

42. Corporate Social Responsibility Expenditures

43. Gross amount required to be spent by the Company during the year: Rs. 50.19,308/- Rs. 59,15,024/-)

44. Amount spent during the year on :

45 Research & Development

The company has a set up of recognized Research ii Development Centre [R & D Centre) at its Kalol plant. The activities of this R & D Centre are exclusively confined to the product development, particularly development of new products For domestic S International markets. The qualifying product development expenses or the said R & D Centre which satisfy recognition criteria for intangible asset ea set out in Accounting Standard-26 ''Intangible Asset" are capitalized by the company as Intangible Asset and is included under the head ''Intangible Asset under development in Note no. 11 - Fixed Assets'' and the same shall be amortized as per amortization policy consistently followed by the company. Based on the Accounting Expert''s opinion obtained by the company, the accounting treatment referred to above is within the purview of Accounting Standard-26 "Intangible Assets"

Till previous financial year, such expenses were treated as revenue in nature & charged off in the statement of Profit & loss since the recognition criteria for intangible asset as set out In Accounting Standgi''d-26 "Intangible Assets'' were not fully met.

The company had treated these R SO expenditure as revenue expenditure in its declared interim financial results for three quarters [i.e. up to 31 12.15) of F.Y 2015-l6 submitted to stock exchange Based on accounting expert''s opinion referred 1.0 above, the company has restated said interim financial results incorporating the impact of above revision m accounting treatment to submitted the restated results for above-referred three quarters of F.Y. 2015 -16 to stock exchange For public dissemination.

46. During the year, the company has made contribution of Rs. Nil (Rs. 35,00,000/- )to Political Party.

47 Prior Period Expenses of Rs. 25,33,713/- [ Re. 51,0 3,343/-} has been recognized under relevant heads in Statement of Profit & Loss.

48 Figures in brackets represent previous year''s figures.

49 Previous year’s figures have been regrouped/reclassified where necessary to correspond with the current year''s classification disclosures

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Mar 31, 2015

1 SHARE CAPITAL

a. The company has only one class of equity shares having a par value of Rs. 10 per share. Each shareholder of equity share is entitled to one vote per share.

b. The company declares and pays dividends in Indian rupees. The Board of Directors, in their meeting held on 11th November, 2014, declared an interim dividend of Rs. 1.50 per Share (Previous year Rs. NIL). Further, the board of directors in their meeting held on 26th May, 2015 have proposed final dividend of Rs. 1.50/- per share (Previous year Rs. 2.65/-) for financial year ended 31st March, 2015. The proposed final dividend is subject to the approval of the share holders at the ensuing Annual General Meeting. The total dividend appropriation for the year ended 31st March, 2015 would amount to approximately Rs. 9,63,05,300/- (Previous year Rs. 7,06,96,764/-) including coporate dividend tax of Rs. 1,61,68,372/- (Previous year Rs. 1,20,49,915/-).

c. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

Indian Rupee Term Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 46,87,500/- to be repaid by May, 2017. The loan is secured by first pari passu charge on company's fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security.

Indian Rupee Term Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 2,40,00,000/- to be repaid by August, 2019. The loan is secured by first pari passu charge on company's fixed assets (excluding cars / vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security.

Indian Rupee Corporate Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 3,12,50,000/- to be repaid by August, 2019. The loan is secured by first pari passu charge on company's fixed assets (excluding cars/vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security and personal guarantee of Mr. Harish Sheth & Mr Udit Sheth.

Indian Rupee Term Loan from ICICI Bank is repayable in 16 quarterly installments each of Rs. 62,50,000/- to be repaid by January, 2020. The loan is secured by first pari passu charge on company's fixed assets (excluding cars/vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security.

Working Capital Loans are secured by first charge by way of hypothecation of current assets including stocks, book debts etc. and second charge on entire fixed assets of the company on paripassu basis.

Unsecured Loan is from ICICI Bank Rs. Nil tRs. 10,00,00,000/-) and is Guaranteed by Chairman & Managing Director of the Company.

2 TRADE PAYABLES

The information has been determined to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSME.

Interest paid/payable to the enterprises registered under MSME is Rs. NIL tRs. NIL).

2.1 Investments in other related entities, Subsidiary/Joint Venture have been made in terms of investment limits approved by Board of Directors of the company from time to time.

2.2 The Company has entered into a joint venture agreement with Lingotes Especiales, Spain to establish a Foundry Project in Lava Cast Private Limited. The Company holds 72.95% Equity shares as on 31st March, 2015 in this joint venture and accordingly Lava Cast Private Limited has been reported as subsidiary company in financial statements.

2.3 As per Legal Experts' opinion obtained by the Company on its investment (along with Corporate Guarantee extended to the Bankers of investee company), Lava Cast Private Limited qualifies to be treated as both, Subsidiary and Joint Venture for legal purposes and the Company's exposure in Lava Cast Private Limited is in compliance with the provisions of Sections 185 & 186 of the Companies Act, 2013 and relevant Rules prescribed thereunder.

2.4 For Detailed Investment Strategies Refer Note No. 44.

3 EXCEPTIONAL ITEMS

Exceptional Items of Rs. NIL (Previous year Rs. 7,67,21,699/- represents gain recognized on sale of Land to related party.)

4 MAT CREDIT

During the year, company has recognized MAT Credit of Rs. 94,24,987/- for current financial year (Previous year Rs. 4,33,47,930/-) and Rs. 16,28,432/- (Previous year Rs. 85,74,654/-) in respect of previous periods and same is shown as adjustment from the current tax amount in the statement of profit and loss.

5 SALES-IN-TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of financial statements amounts to Rs. 3,18,80,276/- tRs. 1,38,47,921/-). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs. 2,65,35,212/- tRs. 1,12,56,855/-) is shown under the head "Finished Goods" in Note 14 under the head "Inventories".

6 SEGMENT INFORMATION

The Company is operating only in one business segment viz. Auto Components

7 CONTINGENT LIABILITIES & COMMITMENTS

A. Contingent Liabilities :

i) Guarantees given by the bank on behalf of the Company Rs. 1,07,93,861/- tRs. 45,17,390/-).

ii) Guarantee given for £ 1.40 million t£ 1.40 million) to ICICI Bank Limited, U.K. for Wholly Owned Ultimate Foreign Subsidiary's credit facilities Rs. 13,04,66,000/- tRs. 14,05,32,000/-).

iii) Guarantee given for $ 0.65 million ($ 0.65 million) to ICICI Bank Limited, Singapore for Wholly Owned Ultimate Foreign Subsidiary's credit facilities Rs. 4,09,69,500/- tRs. 3,92,27,500/-).

iv) Guarantee given for $ 4.000 million ($ 4.000 million) to Bank of Baroda, New York, USA for Wholly Owned Ultimate Foreign Subsidiary's credit facilities Rs. 25,21,20,000/- tRs. 24,14,00,000/-).

v) Guarantee given for Rs. 1,17,05,00,000/- tRs. Nil) to Bank of Baroda, Mumbai, India, for subsidiary's credit facilities.

vi) Warranty Claims raised by Customer but not acknowledged Rs. 1,84,41,563/- tRs. 1,09,61,258/-).

vii) Sales tax demand under dispute Rs. Nil tRs. 22,77,634/-).

B. Note on Pending Litigation :

i) The Pollution Control Department had filed a Civil / Criminal case against the Company and all the Directors in 1993. The Civil matter was disposed in favour of the Company.

In criminal matter against the Company and the Directors, Hon. High Court had quashed the case against all the Nominee Directors. The case will now proceed against the Company and the Managing Director in Local Court.

ii) "The Company had filed a case against a competitor for cancellation of registration of design granted by Controller of Patents and Designs in Kolkata High Court. In view of the settlement of differences under a consent terms, the said case became infructuous, and the process of withdrawal of the case is under process. "

The Company's Management does not reasonably expect that these cases when ultimately concluded / adjudicated will have any material or adverse effect on the Company's results of the Operations or financial condition.

C. Commitments :

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 5,97,37,347/- (Rs. 12,76,56,891/-).

8 TRADE RECEIVABLES & PAYABLES

i) Trade payables' balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of Trade receivables and other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

ii) In the opinion of the management, current and non-current assets are recoverable in the normal course of business.

9 VALUE OF IMPORTED AND INDIGENEOUS RAW MATERIALS, COMPONENTS AND STORES AND SPARES CONSUMED AND PRECENTAGE OF EACH TO TOTAL CONSUMPTION

The Consumption of Raw Materials & Components includes consumption of Imported Components Rs. 75,95,03,767/- tRs. 62,25,20,292/-) which is 27.70% (30.95%) in total consumption.

10 EMPLOYEE BENEFITS

Disclosure pursuant to AS - 15 (Revised) 'Employee Benefits'

i) Defined Contribution Plans

An amount of Rs 2,53,89,927/- tRs. 2,07,10,804/-) (Provident Fund & ESIC) is recognized as an expense and included in Note 22 under the head "Employee Benefits".

ii) Defined Benefit Plans

Contribution to Gratuity Fund

11 Employee Stock Option Plan - ESOP 2010.

The members of the Company in September 2010 approved grant of equity shares under "Setco Automotive Limited Employee Stock Option Scheme 2010", which was framed in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time.

Stock Options exercised after the Balance Sheet date rank pari passu with the equity shares as on the Balance Sheet date and hence are entitled to dividend. If exercised before the record date for the dividend declaration. Accordingly proposed final dividend of current year includes dividend on such equity shares issued and allotted up to the date these financial statements are approved by the board of directors. Dividend on subsequently allotted equity shares is accounted under "Appropriations" as 'Dividend of Previous year including tax thereon'.

12 Investment Strategies :

Over a period, considering the Company's growth prospects and overall economic scenario from time to time, necessitating building strength to withstand the challenges, the Company initiated/followed strategies to integrate, expand the base and diversify. In the process, the Company not only invested in Capex, but also ventured into inorganic developments by investments made into subsidiaries/joint ventures and related entities. These investments may not directly give returns in short term on year to year basis but will contribute to the Company, long term enduring benefits which will be reflected in growth in top and bottom line of the company.

1) Rs. 5,07,59,533/- Invested in equity and preference share of WEW Holdings Limited (Mauritius) a Wholly Owned Ultimate Foreign subsidiary to oversee global investments.

2) Rs. 6,48,40,000/- Invested in Equity shares of Setco Automotive (UK) Limited a Technical know How and development Hub of the group and Brand owner (LIPE) for the Company's products in domestic and international market.

3) Rs. 25,20,50,000/- Invested in Equity shares of Lava Cast Private Limited a Subsidiary established as a backward integration project to augment the supply of critical casting components. The Company has entered in to joint venture agreement with Lingotes Especiales to carry out said economic activity.

4) Rs. 4,85,00,000/- Invested in Equity shares of SE Transstadia Private Limited, a Unique and State of the Art Sports Infrastructure Project with the latest modern Technology, a first of its kind project in India.

5) Rs. 40,35,00,000/- Invested in preference shares of Setco Engineering Private Limited, predominantly an Investment Company. The said Investment in Preference Shares has yielded reasonable tax free returns to the company on year to year basis.

13 Research & Development

In year 2012-2013 the company had set up a separate Research & Development Centre tR&D Centre) which is approved/recognized by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. The new R&D Centre envisages reduction in costs through value engineering and research with new material and processes, development of new range of products, research & development, innovation, up gradation & improvement in the existing range of products on regular basis.

14 During the year, the company has made contribution of Rs. 35,00,000/- to Bhartiya Janta Party (Political Party).

15 Prior Period Expenses of Rs. 51,08,348/- tRs. 30,70,377/-) has been recognised under relevant heads in Statement of Profit & Loss.

16 Figures in brackets represent previous year's figures.

17 Previous year's figures have been regrouped/ reclassified wherever necessary to correspond with the current year's classification/ disclosure.

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Mar 31, 2014

1. a. The company has only one class of equity shares having a par value of Rs. 10 per share. Each shareholder of equity share is entitled to one vote per share. The company declares and pays dividends in Indian rupees; the dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

b. During the year ended 31st March 2014. Dividend of Rs. 2.65/- per share (Previous year Rs. 2.65/- per share) is recognized as amount distributable to equity share holders.

c. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

2. Indian rupee Term Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 71,87,500/- to be repaid by March, 2015. The loan is secured by first pari passu charge on company''s fixed assets [excluding cars/vehicles] and the second charge on pari passu basis an stocks and book debts as collateral security.

Indian rupee Term Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 46,87,500/- to be repaid by June, 2017. The loan is secured by first pari passu charge on company''s fixed assets [excluding cars/Vehicles] and the second charge on pari passu basis an stocks and book debts as collateral security.

Indian rupee Term Loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 2,40,06,000/- to be repaid by May, 2019. The loan is secured by first pari passu charge an company''s fixed assets [excluding cars/Vehicles] and the second charge on pari passu basis an stocks and book debts as collateral security.

Indian rupee Term Loan from HDFC Bank is repayable by March 2015 in varying monthly installments ranging from Rs. 78214/- to Rs. 85695/- and is secured against the vehicles purchased.

3. I. investments in other related entities have been made in terms of investments limits approved by Board of Directors of the Company from time to time.

II. includes fresh investment of Rs. 2765,00,000 (2,76,50,000 preference shares of Rs. 10 each) and sale of Investment of Rs. 30,90,00,000 (3,09,00,000 Preference shares of Rs. 10 each) at par an Ex-dividend basis.

4. EXCEPTIONAL ITEMS

Exceptional Items of Rs. 7,67,21,699/- (Previous year Rs. Nil) represents gain recognized on sale of Land to related party.

5. MAT CREDIT

During the year, company has recognized MAT Credit of Rs. 85.74.654/- in respect of previous periods and 4,33,47,930/- (Previous year Rs 3,96,31,788/-) for current financial year and same is shown as adjustment from the current tax amount in the statement of profit and loss.

6. GALES- IN- TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of financial statements amounts to Rs. 1,38.47.921 /- (Rs. 3,17, 87,995/-). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs. 1,12,56,855/- (Rs. 2,37,66,621/-) is shown under the heed "Finished Goads" in Note 15 under the head "Inventories"

7. CONTINGENT LIABILITIES & COMMITMENTS

A. Contingent Liabilities:-

i) Guarantees given by the bank on behalf of the Company Rs. 4,51 7,390 (Rs Nil )

ii) Guarantee given for Rs. 1.40 million (Rs. 1.40 million) to ICICI Bank Limited, U.K. for ultimate subsidiary''s credit facilities Rs. 14,05,32,000 [Rs. 11.59,06,000]

iii) Guarantee given for $ 0.65 million ($ 0.65 million) to ICICI Bank Limited, Singapore, for ultimate subsidiary''s credit facilities Rs.3,92,27,500 (Rs. 3,55,16,000)

iv) Guarantee given for $ 4.000 million ($ 5.995 million) to Bank of Baroda, New York, USA for ultimate subsidiary''s credit facilities Rs 24,14,00,000 (Rs. 32,75,65,800)

v) Warranty Claims raised by Customer but nat acknowledged Rs. 1,09,61,258 (Rs. 1,53,11.238).

vi) Sales tax demand under dispute Rs. 22,77,634 (Rs. Nil)

B. Commitments:-

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.12,76,56,891 (Rs. 3,93,62,394)

8. TRADE RECEIVABLES & PAYABLES

i) Trade payables'' balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of Trade receivables and other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

ii) In the opinion of the management, current and non-current assets are recoverable in the normal course of business.

9. VALUE OF IMPORTED AND INDIGENEOUS RAW MATERIALS, COMPONENTS AND STORES AND SPARES CONSUMED AND PRECENTAGE OF EACH TO TOTAL CONSUMPTION

The Consumption of Raw Materials & Components includes consumption of Imported Components Rs. 62,25,20,292 (Rs. 66,79,30,377) which is 30.95% (31.08%) in total consumption.

10. Employee Stock Option Plan - ESOP 2010.

The members of the Company in September 2010 approved grant of equity shares under "Setco Automotive Limited Employee Stock Option Scheme 2010", which was framed in accordance with Securities and Exchange Board of India (Employee Stack Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time

11. Research & Development

In year 2012-2013 the company had set up a separate Research & Development Centre (R&D Centre) which is approved/recognized by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India The new R&D Centre envisages reduction in costs through value engineering and research with new material and processes, development of new range of products, research & development, innovation, up gradation & improvement in the existing range of products an regular basis.

12. The whale time Company Secretary had resigned in December 2013. Since there is no Company secretary as on the date, the account are not signed by the Company Secretary. However, a certificate of compliance of Provisions of the Companies Act, 1956 is obtained from e practicing Company Secretary.

13. Figures in brackets represent previous year''s figures.

14. Previous year''s figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification/ disclosure.

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Mar 31, 2013

1 EXCEPTIONAL ITEM

The exceptional item of Rs. NIL (Previous year Rs. 2,84,40,454/-) represents amount of charge towards sharing of cost saving benefits in respect of Uttarakhand unit, as recovered by a major customer,

2 MAT CREDIT

During the year, Company has recognized MAT Credit of Rs. 3,96,91,788/- (Previous year Rs. 9,14,38,334/-) and same is shown as adjustment from the current tax amount in the statement of profit and loss.

3 SALES- IN- TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of financial statements amounts to Rs. 3,17,87,995/- tRs. 3,14,36,815/-). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs, 2,37,60,321/- CRs. 2,27,30,187/-) is shown under the head "Finished Goods" in Note 17 under the head "Inventories"

4 CONTINGENT LIABILITIES & COMMITMENTS

A. Contingent Liabilities:-

i) Guarantee given by the bank on behalf of the Company Rs. Nil (Rs. 21,35,170/-)

ii) Guarantee given for £1.40 million ( £2.3 million) to iCICI Bank Limited, U.K. for ultimate subsidiary''s credit facilities Rs. 11,59,06,000/-(Rs. 18,91,06,000/-)

iii) Guarantee given for $ 0.65 million C$ 0.65 million ) to ICICI Bank Limited, Singapore, for ultimate subsidiary''s credit facilities Rs. 3,55,16,000/-CRs. 3,34,23,000/-)

iv) Guarantee given for $ 5.995 million ($ 5.995 million) to Bank of Baroda, New York, USA for ultimate subsidiary''s credit facilities Rs. 32,75,66,800/-- (Rs. 30,82,62,900/-)

v) Warranty Claims raised by Customer but not acknowledged Rs. 1,53,11,238/- (Rs. 1,18,58,292/-).

B. Commitments:-

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 3,93,82,394/- (Rs. 3,54,79,767/-)

5 TRADE RECEIVABLES & PAYABLES

i) Trade payables'' balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of Trade receivables and other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

ii) In the opinion of the management, current and non-current assets are recoverable in the normal course of business.

6 VALUE OF IMPORTED AND INDIGENEOUS RAW MATERIALS, COMPONENTS AND STORES AND SPARES CONSUMED AND PRECENTAGE OF EACH TO TOTAL CONSUMPTION

The Consumption of Raw Materials & Components includes consumption of Imported Components Rs. 66,79,30,377/- (Rs. 52,91,84,782/-) which is 31,08% [23.05%) in total consumption.

7. EMPLOYEE BENEFITS

Disclosure pursuant to AS - 15 (Revised! ''Employee Benefits''

i) Defined Contribution Plans

An amount of Rs 1,79,61,804/- (Rs. 1,55,34,984/-) (Provident Fund S. ESIC) is recognized as an expense and included in Note 25 under the head "Employee Benefits",

ii) Defined Benefit Plans

8 Research & Development

During the year, the Company has set up a separate Research & Development Centre (R&D Centre) which is approved/recognized by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. The new R&D Centre envisages reduction in costs through value engineering and research with new material and processes, development of new range of products, research & development, innovation, upgradation & improvement in the existing range of products on regular basis.

9 Figures in brackets represent previous year''s figures.

10 Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

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Mar 31, 2012

A. The company has only one class of equity shares having a par value of Rs. 10 per share. Each shareholder of equity share is entitled to one vote per share. The company declares and pays dividends in Indian rupees; the dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuring Annual General Meeting.

b. During the year ended 31st March 2012, Dividend of Rs. 4/- per share (Previous year Rs. 4/- per share) is recognized as amount distributable to equity share holders.

c. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

Indian rupee term loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 71,87,500/- to be repaid by March, 2015. The loan is secured by first pari passu charge on company's fixed assets (excluding cars/ vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security Indian rupee term loan from HDFC Bank is repayable in equated monthly installments each of Rs. 86,410/-, by March 2015,and is secured against the vehicles purchased.

Indian rupee term loan from Kotak Mahindra Prime Ltd is repayable in equated monthly installments each of Rs.71,251/-, by April, 2013 and is secured against the vehicles purchased.

Indian rupee term loan from Bank of Baroda is repayable in 16 quarterly installments each of Rs. 2,29,00,000/- to be repaid by December, 2012. The loan is secured by first pari passu charge on company's fixed assets (excluding cars/ vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security.

Indian rupee term loan from HDFC Bank is repayable in 16 quarterly installments each of Rs. 56,25,000/- to be repaid by December, 2012. The loan is secured by first pari passu charge on company's fixed assets (excluding cars/vehicles) and the second charge on pari passu basis on stocks and book debts as collateral security

1.1 Investment in SE Trasstadia Pvt. Ltd. and SETCO Engineering Pvt. Ltd., associate concerns have been made in terms of approval given by the members of the company in the Annual General Meeting of the company held on 24th September 2009.

1.2 Investment in the equity shares of Rs. 10/- each of SE Transtadia Pvt. Ltd., have been made at a premium of Rs. 40/- based on the future projections and relative worth of the company.

2 EXCEPTIONAL ITEM

The exceptional item of Rs. 2,84,40,454/- represents amount of charge towards sharing of cost saving benefits in respect of Uttarakhand unit, as recovered by a major customer.

3 MAT CREDIT

During the year, company has recognised MAT Credit of Rs.5,08,84,979/- in respect of previous periods and Rs.4,05,53,355/- for current financial year and same is shown as adjustment from the current tax amount in the statement of profit and loss.

4 SALES-IN-TRANSIT

The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of approval of financial statements amounts to Rs.3,14,36,815/- (Rs.1,57,89,695/-). With a view to reflect true and correct position of revenue, the said amount is reduced from total sales of the year and the stock value there of Rs.2,27,30,187/- (Rs.1,32,37,006/-) is shown under the head "Finished Goods" in Note 18 under the head "Inventories".

5 INCOME TAX SURVEY AND TAX OF PREVIOUS PERIODS

During the year, income tax department ('department') carried out survey operations in the company premises. Consequent to the review of records by the department representatives, declarations and submissions made on the basis of legal advice, Company re-worked certain tax benefits and also offered additional income of Rs 17,00,00,000/- to make up for deficiencies, if any, in respect of earlier years taxable income. The revised working resulted into additional tax liability of Rs. Nil, after adjusting MAT credit entitlement of Rs. 9,04,26,348/- there by changing the tax base from MAT to normal taxation for preceding financial year.

6 RELATED PARTY DISCLOSURES

A. Names of related parties and nature of relationship :

a. Shri Harish Sheth, the Chairman & Managing Director of the Company is interested in Setco Engineering Private Limited, SE Transstadia Private Limited, Transstadia (Ahmedabad) Private Limited, Transstadia Technologies Private Limited as director, and Western Engineering Works as partner.

b. Mr. Shvetal Vakil is Executive Director of the Company.

c. Mr. Udit Sheth - the Executive Director is a relative of the Chairman &Managing Director and also interested as Director in SE Transstadia Private Limited and Transstadia (Ahmedabad) Private Limited, Transstadia Technologies Private Limited and as partner in Western Engineering Works.

d. Mrs. Urja Harshal Shah (President - Corporate office) & Mr. Harshal J. Shah (Director) are relatives of Mr. Harish K. Sheth and Mr. Udit H. Sheth the Chairman & Managing and Executive Director respectively.

e. List of Foreign Subsidiaries :

- Setco Automotive UK Limited (UK)

- Setco Automotive N.A. Inc. (USA)

- WEW Holdings Limited, Mauritius

f. List of Associate Concerns :

- SE Transstadia Private Limited

- Transstadia (Ahmedabad) Private Limited

- Transstadia Technologies Private Limited

- Setco Engineering Private Limited

- Transstadia Capital Private Limited.

In terms of approval by the Central Government u/s 297 of the Companies Act, 1956 commission is payable to a firm (in which the directors are interested) on OE and SPD sales achieved @2% based on the sales figures reported in the audited accounts. Commission payable in respect of sales during the period 2010-2011 has been accounted during the year under review. Advance of Rs. 5,67,99,559/- (Rs. 4,93,50,282/-) due from the firm represents amount paid during the year to be adjusted against commission to be determined on approval of accounts for the year ended 31st March, 2012 as per consistent policy followed from year to year.

7 CONTINGENT LIABILITIES & COMMITMENTS

A. Contingent Liabilities

i) Guarantees given by the bank on behalf of the Company Rs. 21,35,170 (Rs. 24,62,937).

ii) Guarantee given to ICICI Bank Limited, U.K. for ultimate subsidiary's credit facilities Rs.18,91,06,000 (Rs. 16,70,26,000 ) (£2.3 million).

iii) Guarantee given to ICICI Bank Limited, Singapore. for ultimate subsidiary's credit facilities Rs.3,34,23,000 (Rs. Nil ) ($ 0.65 million).

iv) Guarantee given to Bank of Baroda, New York, USA for ultimate subsidiary's credit facilities Rs.30,82,62,900 (Rs. 26,95,35,200 ) ($ 5.995 million).

v) Bills Receivable discounted with the Bank and not matured Rs. Nil (Rs 12,06,646).

vi) Warranty Claims raised by Customer but not acknowledged of Rs. 1,18,58,292 (Rs.51,14,338).

B. Commitments

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.3,54,79,767 (Rs. 3,02,14,100)

8 TRADE RECEIVABLES & PAYABLES

i) Trade receivables and Trade payables balances are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of other debit/credit balances, balance confirmations have not been obtained and therefore, are subject to reconciliation and adjustment if any.

ii) In the opinion of the management, current and non-current assets are recoverable in the normal course of business.

9 EMPLOYEE BENEFITS

Disclosure pursuant to AS - 15 (Revised) 'Employee Benefits'

i) Defined Contribution Plans

An amount of Rs 1,55,34,984/- (Rs. 1,21,42,637/-) (Provident Fund & ESIC) is recognized as an expense and included in Note 27 under the head "Employee Benefits".

ii) Defined Benefit Plans Contribution to Gratuity Fund

10 EMPLOYEE STOCK OPTION PLAN - ESOP 2010.

The company instituted "Setco Automotive Limited Employee Stock Option Scheme 2010" as approved in earlier year by the shareholders of the company and administered by the Compensation Committee of the Board.

Setco Automotive Limited Employee Stock Option Scheme 2010

11 Research and development expenses aggregating to Rs.24,59,716/- in the previous financial year have been regrouped and debited to respective revenue expenses account.

12 Figures in brackets represent previous year's figures.

13 The revised schedule VI has become effective from 1st April 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped/ reclassified wherever necessary to correspond with the current year's classification/ disclosure.

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Mar 31, 2011

1. The figures of previous year are reclassified/regrouped / restated for consistent presentation, wherever necessary.

2. Figures in brackets represent previous year's figures.

3. During the year, the company has settled the full and final term liability to the financial Institution.

4. In the previous year, Company's wholly owned subsidiary (WEW Holding Ltd.) had disinvested its 100% stake in Setco Global GmbH, Austria. In the opinion of the management, Company has complied with the requirements of the concerned authorities and do not expect any material liability on account of the disinvestment.

5. The Company had purchased the land and factory building situated at Village Alindra, Taluka Kalol in the previous year and had incurred expenses of Rs. 259.28 lacs. Possession of the land and building was also given to the Company by the concerned authorities. Therefore, the said amount was capitalized in the books of account in the previous year. The conveyance of the land is executed and same is registered during the year.

6. During the year, the Authorised share Capital of the Company is increased from Rs. 20 Crores to Rs. 30 Crores by creation of additional one crore equity shares of Rs.10 each.

7. During the year, the Company capitalised out of its "Securities Premium Account” the sum of Rs. 88,218,800 and issued 8,821,880 fully paid equity shares as Bonus shares of Rs. 10 each in the ratio of 1 (one) equity share for every 1 (one) share held by the members on the record date.

8. Secured Loans:

i. Secured Credit facilities are from Bank of Baroda & HDFC Bank Limited. They are secured on pari passu basis as under :

a) Term Loans are secured by first charge by way of equitable mortgage of immovable properties and hypothecation of movable properties and the second charge on stocks and book debts present and future.

b) Cash Credits are secured by first charge by way of hypothecation of stocks, stores and components etc. and book debts and the second charge by way of equitable mortgage of immovable properties and hypothecation of movable properties present and future.

9. Contingent Liabilities

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.30,214,100 (Rs. 10,394,134)

ii) Guarantees given by the bank on behalf of the Company Rs. 2,462,937 (Rs. 1,773,000)

iii) Guarantee given to ICICI Bank Limited, U.K. for ultimate subsidiary's credit facilities Rs.167,026,000 (Rs.157,573,000) (£2.3 million)

iv) Guarantee given to Bank of Baroda, New York, USA for ultimate subsidiary's credit facilities Rs.269,535,200 (Rs. 272,412,800) ($ 5.995 million)

v) Bills Receivable discounted with the Bank and not matured Rs.1,206,646 (Rs 1,142,795.)

vi) Warranty is extended on products sold, undertaking to repair or replace the items that fail during the warranty period. The warranty expenses are accrued / accounted as and when claim are accepted.

vii) Income Tax demand under dispute of Rs. NIL (Rs. 2,785,755)

10. The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of adoption of this financial statements amounts to Rs. 157.90 lacs (Rs 220.08 lacs.) With a view to reflect the true and correct position of revenue the said amount is reduced from the total turn-over during the year and the stock value thereof of Rs. 132.37 Lacs (Rs. 171.15 lacs) is shown under the head "Sales in Transit” in Schedule 7 under the head "Inventories”.

11. Disclosure pursuant to AS – 15 (Revised) 'Employee Benefits'

i) Defined Contribution Plans

An amount of Rs 12,142,637 (Rs. 8,711,258) (Provident Fund & ESIC) is recognized as an expense and included in schedule 14 under the head "Personnel Expenses”.

12. The Company has not received information from suppliers or service providers, whether they are covered under Micro, Small and Medium Enterprises (Development) Act, 2006 and hence, it has not been possible to give the required information relating to such suppliers and amounts unpaid, if any, as at year end.

13. (a) The Company has initiated the process of obtaining balance confirmations in respect of sundry debtors / sundry creditors.

Such balance confirmations are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of other debit / credit balances, balance confirmations have not been obtained, and therefore, are subject to reconciliation and adjustment, if any.

(b) In the opinion of the Management, current assets, loans and advances are recoverable in the normal course of business.

14. In the absence of notification specifying the effective date and the applicable rate and amount of cess to be levied towards a fund to be established for rehabilitation and revival of Sick Industrial Units in terms of section 441 A of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act, 2003, no provision is made for the cess in the accounts for the year.

15. Related Party information

i) Names of related parties and nature of relationship :

Shri Harish Sheth, the Chairman & Managing Director of the Company is interested in Setco Engineering Private Limited (formerly Setco Auto Private Limited), SE Transstadia Private Limited, Transstadia (Ahmedabad) Private Limited, Transstadia Technologies Private Limited, Western Engineering Works as director / partner, whereas one of his relatives is a partner in Gujarat Engineering Company.

Mr. Shvetal Vakil is Executive Director of the Company.

Mr. Udit Sheth – the Executive Director is a relative of the Chairman &Managing Director and also interested as Director in SE Transstadia Private Limited and Transstadia (Ahmedabad) Private Limited, Transstadia Technologies Private Limited and as partner in the firm of Western Engineering Works.

Mrs. Urja Harshal Shah (President – Corporate office) & Mr. Harshal J. Shah (Director) are relatives of Mr. Harish K. Sheth and Mr. Udit H. Sheth the Chairman & Managing and Executive Director respectively.

List of Subsidiaries :

- Setco Automotive UK Limited UK

- Setco Automotive N.A. Inc. (USA)

- WEW Holdings Limited, Mauritius

List of Associate Concerns :

- SE Transstadia Private Limited

- Transstadia (Ahmedabad) Private Limited

- Transstadia Technologies Private Limited

- Setco Engineering Private Limited

In terms of approval by the Central Government u/s 297 of the Companies Act, 1956 commission is payable to a firm (in which the directors are interested) on OE and SPD sales achieved @2% based on the sales figures reported in the audited accounts. Commission payable in respect of sales during the period 2009-2010 has been accounted during the year under review. Advance of Rs. 493.50 lacs (Rs.368.07 lacs) due from the firm represents amount paid towards expenses during the year to be adjusted against commission to be determined on approval of accounts for the year ended 31st March, 2011as per consistent policy followed from year to year.

16. Employee Stock Option Plan - ESOP 2010

a. Pursuant to approval of shareholders at their meeting held on September 18, 2010, the Company has established an 'Employee Stock Option Scheme 2010' ('ESOP 2010' or 'the Scheme') to be administered by the Remuneration Committee of the Board of Directors.

b. Under the Scheme, options not exceeding 212,800 have been reserved to be issued to the eligible employees, with each option conferring a right upon the employee to apply for one equity share. The options granted under the Scheme would vest not less than one year and not more than four years from the date of grant of the options, depending upon the category of employees. The options granted to the employees would be capable of being exercised within a period of one year from the date of vesting.

c. The exercise price of the option is Rs. 124/- per Option which is the closing market price of the shares on the Stock Exchange as on the date prior to the date of the Remuneration Committee resolution approving the grant.

d. Pursuant to the above mentioned scheme, the Company has, during the year, granted 208,000 options vesting over a period of four years commencing from the respective dates of grant.

f. The above outstanding options have been granted in two classes, 92,250 options at Rs. 93.00/- per option Class-I and 115,750 options Class-II at Rs. 124.00 per option. A discount of 25% is given to eligible employees in category of 'permanent workers and clerical staff'.

h. In accordance with the requirements of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, and the Guidance Note on "Accounting for employee share based payments” issued by The Institute of Chartered Accountants of India, had the compensation cost for the employee stock option plan been recognized based on the fair value at the date of grant in accordance with the Black Scholes' model, the proforma amounts of the Company's Net Profit and Earnings per share would have been as follows:

17. Additional information pursuant to part IV of Schedule VI to the Companies Act, 1956, in terms of Notification No. GSR 388 (E), dated 15th May, 1995, issued by the Ministry of Law, Justice and Company Affairs, Department of Company Affairs.

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Mar 31, 2010

1. The figures of previous year are reclassified/regrouped / restated for consistent presentation, wherever necessary.

2. Figures in brackets represent previous years figures.

3. The Company has repaid its entire term liabilities to Financial Institutions. The additional claim, if any, on final reconciliation and confirmation by financial institutions will be considered as and when communicated.

4. During the year under audit, the Companys wholly owned subsidiary (WEW Holding Limited - Mauritius) disinvested its 100% stake in Setco Global Gmbh- Austria. The said disinvestment has no major impact on the operations of the Company. On such disinvestment, Setco Global Gmbh has now ceased to be the Companys step subsidiary. The Company is in the process of necessary compliances with relevant authorities and in the opinion of the management, Company does not expect any material liability on account of disinvestment.

5. The company has purchased the land and factory buildings situated at village Alindra, Taluka Kalol. The company has paid Rs 259.28 lacs towards full price consideration and other incidental expenses including stamp duty etc. for the land and buildings. Possession of the land and buildings is also given to the Company by the concerned authorities. Execution of Conveyance Deed is in progress with Revenue Authorities. In the opinion of management, Company has a clear and marketable title to the land, and hence, the price consideration paid is capitalised and disclosed in Block of Fixed Assets in Schedule - 5 of the Balance Sheet.

6. Exceptional/ Extraordinary items charged to profit & loss account for the year include:

i) An old excise Duty matter, contested in Gujarat High court/Supreme Court adjudicated during the year of Rs. NIL (Rs. 14,271,256.)

ii) Loss Rs.NIL (Rs. 122, 68,700) in respect of Derivative transaction on account of adverse foreign exchange fluctuation.

7. i) Secured Credit facilities are from Bank of Baroda & HDFC Bank Limited. They are secured on pari passu basis as under:

a) Term Loans are secured by first charge by way of equitable mortgage of immovable properties and hypothecation of movable properties and the second charge on stocks and book debts present and future.

b) Cash Credits are secured by first charge by way of hypothecation of stocks, stores and components etc. and book debts and the second charge by way of equitable mortgage of immovable properties and hypothecation of movable properties present and future.

ii) Unsecured loan from Tata Capital Limited is guaranteed by pledge of shares of SAL held by Shri Harish Sheth, the Chairman & Managing Director and by his personal guarantee.

8. Contingent Liabilities

i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 10,394,134 (Rs. 16,260,508)

ii) Guarantees given by the bank on behalf of the Company Rs. 1,773,000 (Rs. 1,773,000)

iii) Guarantee given to ICICI Bank Limited, U.K. For ultimate subsidiary credit facilities Rs. 157,573,000 (Rs.168,958,000) (£ 2.3 million)

iv) Guarantee given to Bank of Baroda, New York, USA for ultimate subsidiary credit facilities Rs.272,412,800 (Rs.307,363,650) ($ 5.995 million)

v) Bills Receivable discounted with the Bank and not matured Rs. 1,142,795 (Rs. 5,663,272) vi) Warranty is extended on products sold, undertaking to repair or replace the items that fail during the warranty period. The warranty expenses are accrued / accounted as and when claim are accepted.

vii) Income Tax demand under dispute of Rs. 2,785,755 (Rs. 7,02,265)

9. The Products dispatched from the factory, which remained in transit in respect of which the risk and reward have not been transferred till the date of adoption of this financial statements amounts to Rs. 220.08 lacs. With a view to reflect the true and correct position of revenue the said amount is reduced from the total turn-over during the year and the stock value thereof of Rs. 171.15 lacs is shown under the head "Sales in Transit" in Schedule 7 under the head "Inventories".

Earlier Company was recognizing sales on despatches from works without having regard to transfer of risk & rewards to the customers. Rs. 1465.50 lacs is the amount of products dispatched during the year whose risk & rewards have been transferred by the time of adoption of these accounts. This change is adopted with a view to consider commercial prudence, past consistent practices of major customers and to present realistic position of revenue. The profit recognized / realized on such sales is Rs.385.70 lacs.

10. Disclosure pursuant to AS - 15 (Revised) Employee Benefits i) Transitional Obligations

During the year, company has adopted Accounting Standard (AS) - 15 "Employee Benefits" (Revised 2005) in respect of accounting for compensated absences. Consequent to its first time adoption, transitional liability difference of Rs. 1,539,029 /- has been adjusted against the opening balance of General Reserve. The current year liability of Rs. 177, 495/- is charged to Profit & Loss Account. This aggregate liability has been worked out by actuarial valuation using project unit credit method.

ii) Defined Contribution Plans

An amount of Rs. 8,711,258 (Rs.7,114,046) (Provident Fund & ESIC) is recognized as an expense and included in schedule 13 under the head "Personnel Expenses".

iii) Defined Benefit Plans

Contribution to Gratuity Fund

11. The Company has not received information from suppliers or service providers, whether they are covered under Micro, Small and Medium Enterprises (Development) Act, 2006 and hence, it has not been possible to give the required information relating to such suppliers and amounts unpaid, if any, as at year end.

12. In the previous year, the Company has initiated the process of obtaining balance confirmations in respect of sundry debtors / sundry creditors. Such balance confirmations are under reconciliation process. Necessary adjustments, if any, will be accounted when the same is reconciled. In respect of other debit / credit balances, balance confirmations have not been obtained, and therefore, are subject to reconciliation and adjustment, if any.

13. In the absence of notification specifying the effective date and the applicable rate and amount of cess to be levied towards a fund to be established for rehabilitation and revival of Sick Industrial Units in terms of section 441A of the Companies Act, 1956 as inserted by the Companies (Second Amendment) Act, 2003, no provision is made for the cess in the accounts for the year.

14. During the year, valuation of inventories is carried out on weighted average basis for all units other than Sitarganj unit on account of implementation of SAP computerized system. Profit for the year are higher by Rs. 2.33 lacs on account of this change.

15. Related Party information

i) Names of related parties and nature of relationship :

Shri Harish Sheth, Managing Director of the Company is interested in Setco Engineering Private Limited (formerly Setco Auto Private Limited), SE Transstadia Private Limited, Transstadia (Ahmedabad) Private Limited, Western Engineering Works as director/ partner, whereas one of his relatives is a partner in Gujarat Engineering Company.

Mr. Shvetal Vakil is Executive Director of the Company.

Mr. Udit Sheth - the Executive Director is a relative of the Managing Director and also interested as Director in SE Transstadia Private Limited and Transstadia ( Ahmedabad ) Private Limited and as partner in the firm of Western Engineering Works.

Mrs. Urja Harshal Shah (President - Corporate office) & Mr. Harshal J. Shah (Director) are relatives of Mr. Harish K. Sheth and Mr. Udit H. Sheth the Managing & Executive Director respectively.

List of Subsidiaries :

- Setco Automotive (UK) Limited, UK

- Setco Automotive (NA) Inc., USA

- WEW Holdings Limited, Mauritius

List of Associate Concerns :

SE Transstadia Private Limited Transstadia (Ahmedabad) Private Limited Setco Engineering Private Limited

In terms of approval by the Central Government u/s 297 of the Companies Act, 1956 commission is payable to a firm (in which the directors are interested) on OE and SPD sales achieved @2% (1.5%) based on the sales figures reported in the audited accounts. Commission payable in respect of sales during the period 2008-2009 has been accounted during the year under review. Advance of Rs.368.07 lacs (Rs.200.99 Lacs) due from the firm represents amount paid towards expenses during the year to be adjusted against commission to be determined on approval of accounts for the year ended 31st March, 2010 as per consistent policy followed from year to year.

16. Segment Information:The Company is operating only in one business segment viz. Auto Components.