India's Setco Automotive to expand capacity as part demand exceeds supply

Setco Automotive Ltd., an Indian supplier of parts to Tata Motors Ltd., plans to raise 1 billion rupees ($21 million) within two years to expand capacity as it seeks to meet automakers’ demand for clutches.

Setco will expand plants at Baroda in western India and Uttarakhand in the north, and open a new facility in an export zone in Gujarat state’s Kandla by the end of March, Chairman Harish Sheth said in an interview today.

“We are expanding so we can fulfill demand rather than have supply fall short,” Sheth said. “We will raise money by increasing our capital, raising debt and some from cash on hand.” He didn’t elaborate.

Suzuki Motor Corp. and Hyundai Motor Co., India’s biggest carmakers, are struggling to meet demand for vehicles as a dearth of batteries, engine castings and other parts forces automakers to curb production in Asia’s third-largest automotive market. Tata Motors, maker of the world’s cheapest car, is importing tires from China after local suppliers failed to anticipate a surge of more than 30 percent in India’s car sales this year.

“We will continue to maintain close to twofold profit growth in coming quarters,” said Seth.

Net income in the three months ended June surged twofold to 52.5 million rupees ($1.1 million) from a year earlier, the company said on Aug. 12. Sales climbed 42 percent.

Setco shares, which fell 1.5 percent to 126.15 rupees as of 2:47 p.m. in Mumbai trading, have climbed 75 percent in the past year, compared with the 67 percent increase in the Bombay Stock Exchange Auto Index.