### **Company Overview** Setco Automotive Ltd, established in 1982, is India’s largest and a globally recognized manufacturer of **Medium and Heavy Commercial Vehicle (M&HCV) clutches**, operating as a **Tier I supplier** to leading OEMs such as Tata Motors, Ashok Leyland, Daimler, Mahindra, and Volvo Eicher. The company is the flagship entity of the Sheth Group and operates under the premium **'LIPE' brand** in both domestic and international markets. With over four decades of engineering excellence, Setco has evolved from a clutch specialist into a diversified auto component supplier for commercial vehicles and farm equipment. The company holds a **dominant ~65% market share** in the domestic M&HCV clutch segment and serves a full spectrum of customers across **OEM, Original Equipment Spares (OES), Independent Aftermarket (IAM), and export markets**. Its integrated operations span the entire value chain—from product design and R&D to manufacturing, distribution, and aftermarket support. --- ### **Core Business Segments** Setco's revenue is derived from four key business segments: #### 1. **OEM Segment** - Contributed **32.5% of total revenue in FY25**, growing **12% YoY** due to increased market share and new product development. - A strategic focus on expanding business with M&HCV OEMs, especially with BS-VI-compliant and electric vehicle-ready clutch systems. - Developing **new clutch ranges specifically for Light Commercial Vehicles (LCV)** and **farm tractors**, with commercial supply ramped up in Q4 FY25. - Positioned to benefit from government-led infrastructure development and mining activity driving CV demand. #### 2. **Aftermarket Segment** - Accounts for **15.6% of FY25 revenue**, with **31% growth**, driven by rising vehicle parc, aging fleet, and increased demand for organized spare parts. - Operates through two channels: - **Original Equipment Spares (OES)**: Direct supply to OEMs' spare parts networks. - **Independent Aftermarket (IAM)**: Branded under **'LIPE'**, with strong recognition across India and internationally. - Aftermarket is seen as a **profitable and stable revenue stream**, less sensitive to cyclical demand downturns. #### 3. **Farm Equipment (Tractor) Segment** - A major strategic diversification beyond cyclical MHCV markets. - Successfully entered **OEM supply for modern farm tractors** in FY22, with two major Indian OEMs on board. - Developed next-gen clutches (e.g., 22-inch dual/double clutches) that have passed field testing and are in high demand globally. - R&D focused on **high-efficiency, high-durability clutches** for high-horsepower tractors. - Expected to grow into a **10–15% revenue contributor**, supported by India being the **world’s largest tractor producer**. #### 4. **Exports & International Markets** - A **key growth driver**, with three overseas subsidiaries: - **Setco Automotive (UK) Ltd (SAUL)**: R&D hub and European marketing arm for LIPE brand. - **Setco Automotive (NA) Inc (SANAI)**: North American subsidiary with strong sales traction. - Middle East subsidiary: Supporting regional distribution and expansion. --- ### **Strategic Expansion & Product Diversification** Setco is strategically broadening its product portfolio beyond clutches, focusing on **vertical integration** and **value-chain expansion**: #### **Allied Products (Launched 2024–2025)** - Launched a full line of **MHCV and LCV complementary products**: - **Flywheels**, **Bearings**, **Brakes**, **Lubricants**, **Oils** - Distributed through existing **pan-India network**, enhancing customer reach and cross-selling opportunities. #### **New Product Launches (2025)** - **Automotive Water Pump (June 2025)**: Designed for LCVs and MHCVs with focus on **thermal efficiency**, **NVH performance**, and **seal integrity**. Marks entry into the engine cooling segment. - **Load Cushion & Torque Rod Bush**: Entry into **suspension solutions** for MHCVs, enhancing ride comfort and durability. - **Angular Spring Design (ASD) Clutches**: Specifically developed for **North American market**, receiving strong market response. - **Release Bearings, Central Support Bearings, Water Pumps, Diaphragm Springs**: Part of ongoing innovation strategy. --- ### **Manufacturing & R&D Infrastructure** - **Five manufacturing units**: Kalol & Sitarganj (India), Haslingden (UK), Paris, Tennessee (USA), and Valladolid (Spain). - Advanced **in-house capabilities**: Press shop, heat treatment, diaphragm spring manufacturing, and automated foundry operations. - **Foundry Subsidiary – Lava Cast Pvt Ltd**: - Focuses on **precision machined ferrous castings** for auto components. - Achieved **record-low rejection rates (<5%)**, improved yield, and **exported to the US**. - Completed financial restructuring; now targeting **external OEM customers** and export growth. - Capable of supplying flywheels, covers, and machined casting products to US and European markets. #### **R&D Capabilities** - **Two R&D centers** in India and the UK. - Equipped with **3D modeling, product lifecycle management, clutch testing, and validation** labs. - Developed **over 120 clutch variants** for M&HCVs and tractors. - Key role in designing clutches compliant with **BS-IV, BS-VI, and EUROMOT6 standards**. - Leading innovation in **cerametallic clutches** with **double disc life** while maintaining driving comfort. --- ### **Digital Initiatives** - **Setco Connect**: Mobile app enabling **distributors, retailers, and mechanics** to access products, place orders, and receive updates. - Over **30,000 users onboarded** by Sep 2025. - Enables **real-time sales monitoring, targeted campaigns**, and enhanced distribution efficiency. - **Drive Rewards Program**: Incentive program to boost engagement and brand loyalty among mechanics and service partners. --- ### **Global Expansion & International Performance** - **Setco Automotive (UK) Ltd (SAUL)**: - Acts as both an **R&D hub** and **European marketing arm**. - Promotes **LIPE brand** in Europe. - Despite 2% sales growth and ongoing EBITDA losses, implementing **cost-reduction initiatives** and expanding distributor network. - **Setco Automotive (NA) Inc (SANAI)**: - **6% YoY sales growth** in Sep 2025, with **12% EBITDA margins**. - New ASD clutch range gaining traction; future product launches planned. - Viewed as a **high-margin, high-growth market**. - **Export Opportunities**: - Lava Cast secured supply contracts in the **US** and is under RFQs in **Europe**. - Benefiting from **de-risking trends post-pandemic**, with Western customers shifting away from Chinese suppliers. - Over **15,000 MT of annual RFQs** received for machined castings, with **5,000–8,000 MT** expected as long-term orders. --- ### **Recent Financial & Operational Highlights (2024–2025)** - **OEM growth (12%) and Aftermarket boom (31% growth in FY25)** signal strong demand recovery. - **BS-VI transition complete**: All clutch variants compliant and approved by domestic OEMs. - **Expansion into LCV, off-highway, and export clutches** strengthens product depth. - **Mechanical innovations**: Dual disc cerametallic clutch in late-field testing—potential game-changer in India. - **Mission 2025 Strategy** driving operational excellence, cost control, workforce development, and product innovation. --- ### **Challenges & Mitigation** - **Past liquidity stress** due to pandemic and BS-VI transition led to a **financial restructuring in FY21–22**, including: - Transfer of clutch business to **Setco Auto Systems Pvt Ltd (SASPL)**. - **INR 615 crores** raised through India Resurgence Fund (Bain Capital + Piramal Group). - Funds used for debt refinancing, growth capital, and Lava Cast ramp-up. - Lava Cast improved from losses to **positive EBITDA in H2 FY24**, supported by **bank-approved restructuring** and operational upgrades.