Setco Automotive to merge foundry, casting business with parent co

Gujarat-based commercial vehicles' clutch maker Setco Automotive Tuesday said it will merge its foundry and casting business with the parent company.

The move follows Setco Automotive's acquisition of Lingotes Especiales S.A.'s entire stake in Lava Cast Pvt Ltd, an integrated automated foundry and fully-machined casting company, Setco Automotive said in a release.

Lingotes Especiales was the technology and JV partner of Setco Automotive in Lava Cast.

Castings constitute as much as 30 per cent of raw material consumption at Setco Automotive, it said.

At present, Lava Cast foundry production capacity stands at 30,000 mtpa, of which about 65 per cent is expected to be consumed for in-house production by 2019-20, it said.

The merger would facilitate an increase in business opportunities for Setco Automotive through Original Equipment Makers (OEMs), further enabling the purchase of all the supplies under one vendor code, it said.

It will also result in an increase in orders from OEMs MHCV (medium and heavy commercial vehicles) and farm-tractor industry, the release said.

Additionally, the merger would improve operational efficiency as it would result into efficient buying, economies of scale, reduction in overheads and administrative efficiencies, thereby approximately saving around Rs 5 crore per annum.

"This will bring operational efficiencies for our companies and also improve our financial strength, thus ensuring easy availability of finance at competitive rates while contributing to improved cash-flows," Setco Automotive CMD Harish Sheth said.

Besides, the merger would also help the company achieve its target of reaching Rs 1,000 crore revenue by 2020-21 seamlessly, he said.

"We believe the merger would be a valuable step and help us widen our horizon globally. We foresee huge opportunity in the casting business which is majorly consumed by industries like construction, mining, earth-moving equipment, aerospace and defence," he added.

Additionally, Setco Automotive has also forayed into farm sector for supply of clutches which is also one of the biggest consumers of casting, he said.