After a steep decline, Setco Automotive is charting a bold comeback—revamping its core business, expanding into new markets, and redefining its role in India’s commercial vehicle landscape
03 Mar 2025 | 1302 Views | By Shahkar Abidi & Kiran Murali
In fiscal year 2019, Setco Automotive stood at the summit of its industry, reporting a peak revenue of Rs 686 crore. As a dominant supplier of clutches to India’s medium- and heavy-commercial vehicle (M&HCV) market, the company seemed well-positioned for sustained growth. Yet, within two years, the ground beneath it ...
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In fiscal year 2019, Setco Automotive stood at the summit of its industry, reporting a peak revenue of Rs 686 crore. As a dominant supplier of clutches to India’s medium- and heavy-commercial vehicle (M&HCV) market, the company seemed well-positioned for sustained growth. Yet, within two years, the ground beneath it had shifted dramatically. A confluence of regulatory shifts and economic disruptions sent the company into a downward spiral, cutting its revenues nearly in half.
The trouble began with a policy adjustment that, at first glance, appeared beneficial to the logistics sector. The Ministry of Road Transport & Highways revised axle-load limits, allowing trucks to carry heavier loads—an efficiency-driven measure designed to lower transportation costs. While beneficial to fleet operators, the move significantly reduced demand for new commercial vehicles, slowing down a sector that was seen as a barometer of economic activity.
Compounding this upheaval was the disruptive rollout of the Goods and Services Tax (GST) and, soon after, the sweeping lockdowns imposed in response to the COVID-19 pandemic. The consequences were stark. Sales in the M&HCV sector fell by 30%, reaching their lowest point in a decade. For Setco, this contraction proved devastating.
With volumes plummeting, the company made a strategic but painful decision: it suspended its aftermarket operations, narrowing its focus to original equipment manufacturers (OEMs). It was a necessary move, but it came at a cost.
A Lifeline and a Reset
With financial strain mounting, Setco found itself at a crossroads. Relief came in the form of a capital infusion from the India Resurgence Fund, a joint venture between Bain Capital USA and the Ajay Piramal Group. The Rs 600 crore investment—a blend of equity and debt—offered much-needed liquidity, allowing Setco to stabilise its operations. Simultaneously, the company restructured its debt with lenders, securing the breathing room it desperately needed.
By the close of the 2024 financial year, Setco had staged a notable comeback, with operating revenue recovering to Rs 632 crore. Yet profitability remained elusive, an indication that the path forward would not be without further obstacles.
Nonetheless, company leadership remained resolute. “From that period, there has been no looking back,” Neeraj Kumar Singhal, CEO of Setco Auto Systems, remarked in an interview with Autocar Professional. A veteran of manufacturing operations with over three decades of experience, Singhal had previously served as Setco’s chief operating officer.
The company’s ambitions now extend well beyond recovery. By the end of fiscal 2025, it aims to cross Rs 700 crore in revenue, with a bolder target of Rs 1,000 crore by 2026 or 2027. Its vision? To see Setco clutches installed in one out of every three commercial vehicles and one out of five farm tractors worldwide.
Rebuilding Relationships
In the wake of its financial crisis, Setco charted a multi-pronged strategy for recovery. Central to this effort was a renewed focus on its core competency— manufacturing clutches for the M&HCV sector. But reaffirming its traditional stronghold was not enough. The company also worked to re-establish trust with key OEM clients—Tata Motors, Ashok Leyland, VE Commercial Vehicles, Mahindra, and BharatBenz—by addressing supply chain disruptions and refining product quality.
Beyond commercial vehicles, Setco has rekindled its earlier interest in the agricultural sector. While the company had initially ventured into tractor clutches in 2018–19, financial constraints forced it to put those ambitions on hold. Now, with greater financial stability, it has re-engaged with key industry players, submitting product samples to manufacturers such as ITL, CNH, and Gujarat Tractors.
At the same time, Setco looked beyond its historical markets, identifying opportunities in new vehicle segments. One such area was the light commercial vehicle (LCV) sector, where the company had no presence previously. Recognising demand in the segment, Setco pursued and secured Requests for Quotation (RFQs) from major OEMs.
As automated manual transmissions (AMTs) and automatic clutches gain traction in the commercial vehicle sector, the company has invested in engineering enhancements, including thicker materials, refined machining techniques for pressure plates, and an overall recalibration of product durability; positioning itself for the evolving transmission landscape.
Diversification and the Aftermarket Rebound
Setco’s resurgence has not been limited to its traditional business lines. The company has also sought to diversify its portfolio, introducing a suite of allied products— including oils, flywheels, and brake pads—within the aftermarket. While these currently account for just 5% of the total revenue, Setco sees this as an area poised for growth, aiming to double its contribution in the medium term.
Notably, these products are sourced externally but remain subject to Setco’s stringent quality oversight, ensuring consistency with its brand identity. Expanded dealer networks, increased brand visibility, and additional field manpower have strengthened Setco’s foothold in this high-margin segment.
“In the last two years, we have significantly expanded our aftermarket reach—growing our dealer network, increasing our brand showcases, and strengthening our field manpower,” Singhal noted. Beyond domestic expansion, Setco has reasserted itself in international markets. Participation in global auto shows has facilitated customer acquisitions in Kenya, Tanzania, Turkey, Malaysia, and Singapore—an indication of the company’s renewed global ambitions.
The Lava Cast Challenge
Lava Cast, the company’s casting subsidiary, has been a persistent challenge. Burdened by a high rejection rate— hovering between 16 and 20%—Lava Cast had suffered sustained financial losses. Its difficulties were compounded by the dissolution of its joint venture with the Spanish firm Lingotes Especiales S.A. in 2020. The partnership, initially formed to develop and manufacture machined ferrous casting products, unraveled, leaving Setco to navigate the complexities of vertical casting technology without specialised personnel.
Determined to turn the situation around, Setco implemented a rigorous efficiency drive, ultimately bringing rejection rates down to 6%—below the industry average. The impact was immediate: Lava Cast, along with Setco’s foreign subsidiaries, moved into positive financial territory, “...which will give immense support to the growth of Setco Auto,” Harish Sheth, CMD at SETCO Automotive Ltd noted in the company’s most recent annual report.
A Road Paved With Uncertainty, and Opportunity
Setco Automotive’s trajectory over the past few years has been anything but linear. From a peak in 2019 to a nadir in 2021, and now experiencing a gradual but steady resurgence, the company’s journey reflects the volatility of India’s commercial vehicle sector. Regulatory shifts, supply chain disruptions, and economic headwinds have tested its resilience, but Setco’s leadership remains intent on reclaiming lost ground.
With strategic expansions, a renewed aftermarket focus, and a recalibrated financial foundation, the company appears to have steadied itself. Whether it can sustain this momentum in an industry still grappling with transformation remains to be seen. For now, however, Setco seems to have found its footing—and its direction.