Harish Sheth, Chairman & Managing Director, Setco Automotive Limited, is the founder of the company. A core visionary, Sheth has been instrumental in transforming the company from a single product/single location to a multiple product/multi location company, catering towards a remarkable presence for the Company in the international market as well. Mr. Sheth has a Bachelors degree in Mechanical Engineering from the University of Michigan, Ann Arbor and an MBA (Finance) from the Columbia University, New York.
Setco, incorporated in May 1982, is a diversified engineering products company. Setco is the largest manufacturer of clutches for heavy and medium commercial vehicles in India. It also manufactures Precision Components, Pressings and Hydraulics. The company employs more than 600 people globally. It is a Tier I supplier of clutches to all major Indian commercial vehicle manufacturers with a customer base inclusive of prominent names such as Tata Motors, Ashok Leyland, EICHER and AMW. Setco has strategic global footprint with 4 manufacturing facilities globally, 2 in India, and 1 each in UK and USA, with its corporate base in Mumbai, India.
Speaking with Anurag More of IIFL, Harish Sheth says, "In the coming five years we intend to grow our existing size by four times."
What kind of turnover are you seeing for the auto ancillary industry in India?
The auto ancillary segment is doing quite well due to the rapid growth of the automobile industry in India. According to industry sources, the turnover for this year will be US$30bn for auto components and will reach US$150n by 2020. In the beginning, the automotive hub globally was Detroit, then Japan and Europe took over and now it is Asia’s turn with China and India en route to taking on this role. We are very cost competitive, thus giving us that international comparative advantage as far as exports are concerned.
Brief us about your product portfolio.
We manufacture clutches, which we supply to Medium and Heavy Commercial Vehicle manufacturers. These clutches have fast turnover with the average life of a clutch being 2-3 years, so there is big aftermarket. At present, we have about a dozen products in the market with scope for more. Our R&D department plays an important part in developing new products to suit the dynamic and growing customer requirements.
Any plan to enter new segment?
The HCV segment is a niche market. Now with the increasing inflow of new entrants into this segment, our customer base is also expanding both in the domestic and global market. Additionally, there are plans to enter into the LCV segment in the future.
Who are your clients?
In India, we cater to all the major OEMs such as Tata Motors, Ashok Leyland, Eicher and AMW. We are also working with other international players who have entered India.
What makes you different from other players?
We are the leading clutch manufacturer for the M&HCV segment here in India. The reason we have this dominant market share is due to several factors which we focus on - customer service, quality, delivery and pricing included. In fact, today we meet over 75% of the total OE requirements.
Can you throw some light on your various automotive and non automotive businesses and which is major contributor to your revenue?
In India and the UK, we only cater to the automotive industry. Our unit in the US however also produces hydraulics products to cater to the construction industry and highway vehicles, but this contributes to less than 10% of our total revenue.
What are the challenges and opportunities in this sector?
With the growth in the Indian economy, the M&HCV demand is likely to increase substantially. Additionally, with the large inflow of global auto majors and our comparative cost advantage, there is a lot of opportunity for growth. But the challenge we face comes in the terms of competition from overseas players, so we have to continue to make sure that our products are the best in terms of quality and pricing. The second challenge is getting good suppliers to ensure that we can keep pace with the increasing demand.
Can you throw some light on your facilities and are you using it to your fullest capacity?
We have a main facility at Baroda and one facility in Uttarakhand and are planning one SEZ in Kutch, which should begin production sometime next year. We also have a unit each in the UK and USA. We are continuously investing in upgrading our technology so, for us to double production wont take much time and investment. We are presently running on a two - shift basis, but considering it is an assembly line, it would be easy to expand as and when required.
Briefly throw some light on your financials and what is the outlook for the coming year and your revenue contribution from India and abroad?
India accounts for 70% of the consolidated revenue. Last year we grew by 35%, this year we are looking at 40% growth in the topline and improvement in the EBITDA margin.
What is the latest shareholding pattern and any plan for any inorganic growth?
As far as the shareholding pattern is concerned, the promoters own about 65% of the total capital and the balance by others. Setco is always open to good opportunities for expansion. If the Setco group should require funds for any new acquisitions, at that time we will decide whether to expand the capital base.
Your message for the shareholders?
Delivering stakeholder value is extremely important to us. We are looking at very bright future ahead. India is poised for growth which will also be reflected in the commercial vehicle sector and auto components segment. In the last decade, we have grown at a CAGR of over 34%. Looking forward, in the coming five years we intend to grow our existing size by four times.