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Lava Cast set to merge with Setco Automotive

The merger would improve operational efficiency as it would result into efficient buying, economies of scale, and reduction in overheads

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Lava Cast, Setco Automotive, Foundry, Manufacturing, MHCV, Tata motors, Harish Sheth

Lava Cast, an integrated automated foundry and fully-machined casting company, is set to merge with its parent company Setco Automotive.  Completion of this imminent merger is expected to take place on the back of Setco group purchasing all the stake owned by Lingotes Especiales S.A. (technology & JV partner) in Lava cast Pvt. Ltd.

The merger would facilitate an increase in business opportunities for Setco Automotive through OEMs, further enabling the purchase of all the supplies under one vendor code. This will also result in an increase of orders from OEM’s MHCV and farm-tractor industries. Additionally, the merger would improve operational efficiency as it would result into efficient buying, economies of scale, reduction in overheads and administrative efficiencies, thereby estimating savings around Rs 5 crore per annum.

Harish Sheth, CMD, Setco Automotive, said, “This merger will bring operational efficiencies for our companies and also improve our financial strength, thus ensuring easy availability of finance at competitive rates while contributing to improved cash-flows. This merger would also help in achieving our target of reaching INR 1000 Crs revenue by FY21 seamlessly. An enhanced and integrated R&D program will further lead to efficient engineering.”

“We believe the merger would be a valuable step and help us widen our horizon globally. We foresee huge opportunity in the casting business which is majorly consumed by industries like construction, mining, Earth-moving equipment, aerospace and defence. Additionally, we have forayed into the farm sector for the supply of clutches as well, also one of the biggest consumers of casting,” Sheth added.

At Setco Automotive, castings constitute 30% of raw material consumption and Lava Cast ensures availability of quality machined castings on a just-in-time basis. At present, Lava Cast foundry production capacity is 30,000mtpa out of which ~65% is expected to be consumed for in-house production by the FY20.

Setco Automative has been a dominant player in Indian MHCV segment with long-standing relationships with all the OEMs for clutch supplies. These OEMs with an annual demand of over 1 million tonnes of castings would prefer to buy from a state-of-art facility like Lava Cast. The demand already includes a specified requirement of over 3.5 lakh tonnes of machined castings annually by Tata Motors, one of the major customers of Setco Automotive.

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