Setco Automotive to invest Rs 100 cr for backward integration

Heavy vehicle clutches maker, Setco Automotive Limited plans to set up spring manufacturing facility at its existing unit at Kalol near Vadodara.

The company will invest around Rs 100 crore for the spring manufacturing facility, which will help company reduce dependence on imported springs for its clutches.

"We will invest around Rs 100 crore for this backward integration. This will help us save about 30 per cent on costs and reduce our dependence on imported springs," said Shvetal Vakil, executive director, Setco Automotive.

Setco supplies clutches to Tata Motors, Ashok Leyland and multinational auto giant, Daimler for heavy vehicles. The company intends to manufacture diaphragm springs at the new facility. According to company official, these springs are made from the European technology and are used in large clutches having 430 mm diameter.

"We will set up an assembly line operation to manufacture diaphragm springs at our Kalol facility," said Vakil adding that the company imports all of its spring requirements from overseas. The move is believed to make company's clutches competitive in Indian market.

According to Vakil the automotive market has been depressed for past some time. "Overall the scenario is pretty bad. There is a fall in the auto production, thereby leading to reduced demand for auto components."

Considering the uncertainty of fresh orders from auto makers, Setco has increased its focus on after market operations. "A large portion of our revenue comes from after market operations, where we supply parts for maintenance of the already sold vehicles," he said.

For the financial year ended March 2012, company's total income stood at Rs 423 crore on consolidated basis. The company posted net profit of Rs 45.4 crore for the year. For the December quarter of the current fiscal company's net profits grew by 15 per cent at Rs 9.7 crore on the sales of Rs 86.9 crore.

Setco has 4 manufacturing facilities globally, with 2 in India and and 1 each in the UK and USA. Company's key market segments include commercial and military trucks, heavy-medium-light-duty trucks, marine, off-highway and agricultural equipment.