Setco Automotive Limited has entered into agreements to sell its entire stake in subsidiary Setco Auto Systems Private Limited (SASPL) to RSB Transmissions (I) Limited, a Pune-based transmission manufacturer, in a multi-stage transaction valued at up to ₹510 crore in share sale proceeds, plus an additional ₹70 crore in non-compete fees.

The board approved the transaction at a meeting on March 28, 2026, and the agreements were executed the following day. The deal requires shareholder approval, for which an extraordinary general meeting has been scheduled for April 25, 2026.

Two-Stage Share Sale

In the first stage, Setco Automotive will sell 4,47,847 equity shares in SASPL — representing approximately 41% of its fully diluted paid-up capital — for an initial consideration of approximately ₹185 crore, subject to adjustments based on SASPL's net debt and working capital position at closing. This transaction is expected to close within 120 days of the agreement date.

The remaining 2,62,153 shares, representing roughly 24% of SASPL's capital, will be transferred in a second stage under a separate Shareholders' Agreement. That transfer is expected to occur in financial year 2027-28 for a maximum consideration of ₹255 crore, contingent on EBITDA-linked performance milestones.

In addition to the base consideration for the initial sale, Setco Automotive is eligible to receive deferred payments of up to ₹71 crore linked to SASPL's EBITDA performance for the period ending May 31, 2026, as well as a separate non-EBITDA component tied to specified receipts realised by SASPL through July 31, 2026.

IndiaRF Exit and Control Transfer

As part of the broader transaction, India Resurgence Fund (Schemes 1 and 2), which holds 35% of SASPL's paid-up capital, will also exit simultaneously on the closing date. The aggregate consideration payable to IndiaRF is ₹976 crore, of which ₹934 crore will be paid in cash and the balance ₹42 crore settled through Non-Convertible Redeemable Preference Shares issued by SASPL.

Upon completion of the first-stage sale, RSB Transmissions will acquire control of SASPL, including the right to appoint the majority of its board of directors. Voting rights attached to Setco Automotive's residual shares will be exercised by RSB Transmissions from the closing date until those shares are formally acquired.

Non-Compete and Supply Arrangement

Under a non-compete agreement forming part of the transaction, Setco Automotive and its promoter group — Harish Sheth and Udit Sheth — have committed not to engage in any business competing with SASPL for three years following six months after the closing date. RSB Transmissions will pay ₹70 crore (exclusive of GST) as non-compete consideration.

Setco Automotive's wholly owned subsidiary, Lava Cast Private Limited, will remain with the company. Lava Cast operates a casting facility with a capacity of 25,000 metric tonnes per annum. RSB Transmissions has agreed to cause SASPL to enter into a supply arrangement with Lava Cast, under which Lava Cast will reserve 1,000 MT per month of production capacity for SASPL over 18 months, in exchange for a one-time payment of ₹33 crore.

As a consequence of the transaction, Setco Automotive and its promoters will cease using the "Setco" brand and trade name. The board has approved initiating the process of renaming the company to Shilayan Industries Limited, subject to statutory and regulatory approvals. The company also intends to change its registered office and amend the objects clause in its Memorandum of Association.

SASPL is currently a material subsidiary of Setco Automotive, contributing revenue of ₹663 crore — approximately 96% of the group's total revenue — in the financial year ended March 31, 2025. However, the subsidiary reported a negative net worth of ₹696 crore for the same period, indicating significant accumulated losses on its balance sheet.

Arpwood Capital acted as exclusive financial advisor to Setco Automotive and IndiaRF. Wadia Ghandy & Co. served as legal advisor to the company. The buyer, RSB Transmissions, is not affiliated with the company's promoter group.