Setco to set up unit near Pune

The Rs 120 crore Setco Automotive, one of the largest manufacturers of clutches for medium and heavy commercial vehicles in India, is setting up a greenfield facility near Pune. It is also increasing capacity at its plant in Kalol, Gujarat. The new facility will make clutches as well as components for in-house consumption. It is expected to be commissioned next fiscal.

Setco has earmarked capex of Rs 13 crore this fiscal, going up to Rs 20-25 crore in 2007-08. The company meets 90 percent of Tata Motors' HCV needs. Setco's 352/330mm diameter clutches make up 80 percent of clutches used in Tata's MCVs as well. This is 100 percent in the case of Eicher Motors while its 330, 352 and 380mm diameter clutches account for 60 percent of Ashok Leyland's needs.

"The commercial vehicle business in India is headed for good growth in the next five years. A strong economy, road development and government initiatives like overloading limits and clamping down on vehicles which are over 15 years old will contribute to this growth," Harish Sheth, managing director, told Autocar Professional. The company is eyeing a turnover of nearly Rs 350 crore in 2010. It sees good prospects with bigger engines in commercial vehicles. "We gave OEMs the clutch they needed at a price advantage over imports," he said.

Additional business will come from the Lipe brand Setco acquired last December from Dana Corp. The buyout gives the company a strong engineering base and technology for the world market. Given that Lipe is a strong brand in the US and UK, it will help Setco push for exports in the aftermarket business. After this acquisition, Setco is now localising clutches required for more powerful engines overseas. This exercise will be completed soon.

"There are only 3-4 globally known clutch manufacturers but they are priced very high. I am sure exporting from India at a competitive price will help us get a foothold abroad," said Sheth. The strategy is to first establish a brand name through the aftermarket before targeting OE manufacturers where securing orders takes about four years. Setco will focus on the aftermarket in the UK and US where Lipe also has a strong market presence.

The emphasis would then shift to other Lipe markets like China. Setco also jointly markets its clutches and components to the Asia-Pacific region, Turkey and the Middle East. Sheth said that the company is open to more acquisitions as well as setting up operations overseas. It is eyeing virgin markets (where there are no clutch manufacturers) like the Middle East, Africa, Australia and southeast Asia. China could also be on the radar.

AMMAR MASTER