Setco Automotive, a Tier-1 component manufacturer historically known for supplying heavy-duty clutches to commercial vehicle makers including Tata Motors, Ashok Leyland and BharatBenz, reported a sharp turnaround in its April–June 2026 earnings, which were approved by its board on October 23, nearly four months after the quarter ended. The results, released after the July–September quarter had already closed, coincided with the company’s decision to merge its loss-making casting subsidiary, Lava Cast, into the listed entity to reduce costs and streamline operations.
Consolidated net profit attributable to shareholders swung from a loss of ₹34.92 crore in April–June 2025 to a profit of ₹203.61 crore in April–June 2026, a positive swing of ₹238.53 crore, largely driven by an investment gain.
Consolidated revenue from operations increased from ₹47.12 crore to ₹52.90 crore over the same period, a year-on-year increase of 12.3%.
Setco’s board approved the revised merger proposal on October 23, under which wholly owned Lava Cast, a manufacturer of casting components for commercial and passenger vehicles, would be absorbed into the listed company.
Lava Cast recorded turnover of ₹87.78 crore in FY26 and negative net worth of ₹136.71 crore as of March 31, 2026.
The merger aims to eliminate overlapping management functions and reduce accounting, auditing, compliance and tax-filing requirements, delivering what Setco describes as a “consequential reduction in administrative costs”. The company has not quantified the expected savings.
The restructuring follows Setco’s phased divestment of its clutch manufacturing subsidiary, Setco Auto Systems, to RSB Transmissions.
The first closing on May 27, 2026, involved the sale of approximately 41% of the subsidiary for around ₹215 crore, leaving Setco with a residual stake of approximately 24%.
The agreements also provide for a ₹33-crore capacity-reservation fee payable to Lava Cast, linking the retained casting operations with the divested clutch business.
Since Lava Cast is already consolidated, its absorption would not independently increase group revenue or eliminate accumulated losses. No cash consideration or fresh shares are involved.
Standalone net profit increased from ₹0.99 crore to ₹205.30 crore, an increase of approximately 20,637%, while revenue from operations declined from ₹0.38 crore to nil.
Other income included a ₹214.28-crore investment gain and ₹2.25 crore in non-compete income, indicating that the earnings surge was driven principally by non-operating income.
Consolidated material costs increased from ₹20.12 crore to ₹27.95 crore, a year-on-year increase of 38.9%, while employee expenses rose from ₹10.58 crore to ₹19.49 crore, an increase of 84.2%. Finance costs declined from ₹2.34 crore to ₹1.82 crore, a decrease of 22.2%.
Lava Cast’s quarterly loss narrowed from ₹4.40 crore to ₹2.35 crore, a reduction of 46.6%, although its negative net worth widened from ₹107.02 crore in June 2025 to ₹139.06 crore in June 2026.
Auditors highlighted material uncertainty over Lava Cast’s ability to continue as a going concern and qualified Setco’s consolidated financial review because four overseas entities were included using management-certified financial information without audit or limited review.
The merger remains subject to regulatory and tribunal approvals, with its financial benefits dependent on actual cost reductions and improved operating performance.
Published on October 24, 2026
