Setco Automotive to sell SASPL stake to RSB transmissions in Rs 510 crore deal

Setco Automotive Limited has agreed to sell its entire stake in Setco Auto Systems Private Limited (SASPL) to RSB Transmissions (I) Limited. The transaction, valued at up to Rs 510 crore in share sale proceeds and Rs 70 crore in non-compete fees, will lead to a corporate name change and the exit of the Setco brand.

Key Highlights

• Setco Automotive to sell entire SASPL stake to RSB Transmissions for up to Rs 510 crore
• The transaction includes Rs 70 crore non-compete fee and phased share transfers through 2027-28
• India Resurgence Fund to exit SASPL with total consideration of Rs 976 crore
• Setco Automotive to rebrand as Shilayan Industries Limited after deal completion

Transaction Structure and Timeline

The board of Setco Automotive approved the sale on March 28, 2026, with agreements signed the next day. The deal requires shareholder approval, with an extraordinary general meeting scheduled for April 25, 2026.

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

The second stage involves transferring the remaining 2,62,153 shares, or about 24% of SASPL's capital, under a separate agreement. This transfer is expected in the financial year 2027-28 for up to ₹255 crore, depending on EBITDA-linked performance milestones.

Financial Arrangements and Brand Exit

Setco Automotive may receive deferred payments of up to Rs 71 crore, linked to SASPL's EBITDA performance for the period ending May 31, 2026. There is also a non-EBITDA component tied to specified receipts realized by SASPL through July 31, 2026.

India Resurgence Fund (Schemes 1 and 2), which owns 35% of SASPL, will exit at the closing date. The total consideration payable to IndiaRF is Rs 976 crore, with Rs 934 crore in cash and Rs 42 crore through Non-Convertible Redeemable Preference Shares issued by SASPL.

After the first-stage sale, RSB Transmissions will gain control of SASPL and the right to appoint the majority of its board. Voting rights for Setco Automotive's remaining shares will be exercised by RSB Transmissions until the shares are fully acquired.

Setco Automotive and its promoters, Harish Sheth and Udit Sheth, have agreed not to compete with SASPL for three years, starting six months after closing. RSB Transmissions will pay ₹70 crore as non-compete consideration.

Subsidiary and Company Changes

Lava Cast Private Limited, a wholly owned subsidiary of Setco Automotive, will remain with the company. Lava Cast operates a casting facility with a 25,000 metric tonne annual capacity. SASPL will enter a supply arrangement with Lava Cast, reserving 1,000 MT per month for 18 months, for a one-time payment of Rs 33 crore.

Following the transaction, Setco Automotive and its promoters will stop using the "Setco" brand. The board has approved renaming the company to Shilayan Industries Limited, subject to regulatory approvals. The company also plans to change its registered office and amend its Memorandum of Association.

Financial Impact and Advisors

SASPL is a key subsidiary, contributing Rs 663 crore, or 96% of group revenue, in the year ended March 31, 2025. However, SASPL reported a negative net worth of ₹696 crore for the same period, reflecting significant losses.

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

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Conclusion

The Rs 510 crore stake sale to RSB Transmissions marks a pivotal moment in Setco Automotive’s transformation journey. This move is expected to streamline operations, reduce debt, and refocus resources on its core business strengths. As consolidation continues across India’s auto component sector, such strategic partnerships are likely to redefine competitive dynamics in the coming years.