CarZ, a Hyderabad-based auto repair services provider, has received $5 million Series A funding from IndoUS Venture Partners (IUVP), a venture capital firm which provides early and mid-stage funding to new and growing businesses in India.

CarZ offers a full range of repair services including electrical and mechanical repair, accident repair, parts and accessories in convenient neighbourhood locations. The company will primarily utilise the fund to expand its retail outlets across the country, with focus on southern Indian metros.

M. M. Dillon & Co. (formerly CRT Investing Banking), Stamford, CT, USA, was the exclusive advisor to this transaction.

The company was established in 2008 by Venu Donepudi and Vijay Gummadi, both auto experts with experience in the North American auto industry. Venu had worked with General Motors R&D, specialising in areas like robotics, controls, plant floor manufacturing systems and simulation of manufacturing systems.

Stints with other companies in the automotive segment had also helped him gain an insight into the business model. Gummadi, too, had extensive experience in automotive, general manufacturing and information technology in North America and India. As the chief architect of wireless and enterprise computing technologies, he led the Boston-based technology company Virtual Access Networks to develop its first-to-market innovative solutions.

“The car service market in India is extremely lucrative as nearly 2 million cars are being added to the market every year. In fact, there is a huge migration happening – from two-wheelers to four-wheelers. But the market is quite fragmented and unorganised in terms of service providers. One can find plenty of unorganised mechanics who will offer you services.

But those unorganised mechanics don’t have a holistic understanding of new-generation cars which require top quality services and expertise. Before starting the business, we had found that there was a huge gap between sales and servicing. Unlike the western countries, we have very few dealers in India who will provide quality services. And this is where we try to bring in value for our customers,” said Venu Donepudi, co-founder and managing director of CarZ.

According to Kumar Shiralagi, managing director of IUVP, the current growth rate of the Indian passenger car segment is phenomenal. “As has happened in the developed markets like the USA, Europe and Japan, Indian car owners are now conscious of service quality, value pricing and convenience.

They will, therefore, actively seek independent and multi-brand car service centres like CarZ during and post-warranty. CarZ has already established strong customer acceptance and brand identity in the markets in which it currently operates, apart from generating huge nation-wide interest in its business model,” said Shiralagi.

The company, however, is not focusing on servicing brand new cars. Instead, it is keener to provide services to post-warranty cars. “When a car is within the warranty period, you have the privilege to request for replacement. But the actual challenge comes when a car is past its warranty period. We always try to maintain the brand quality of the car even if it’s a Maruti or a Mercedes,” said Donepudi.

CarZ has already partnered with a Germany-based chemical company BASF to outsource good quality paint for full-body painting of a branded car. “We have tied up with BASF to use high quality paint for all make and model of cars. We are very transparent and quite serious about customer care, since we are dealing with their luxury items,” said Donepudi.

The company is eyeing pan-India expansion by 2015 and also wants to increase its presence in Karnataka, Tamil Nadu and Kerala by the end of this financial year through a combination of company-owned and franchise facilities.

According to Donepudi, PE players are taking huge interest in the car service segment and this space has increasingly witnessed a lot of private equity investments in the last couple of years. Recently, Kitara Capital Pvt Ltd acquired a minority stake in Madurai-based TVS Automobile Solutions Ltd for $17.2 million. TVS Automobile is a multi-brand car service network company.

PremjiInvest Fund and India Automotive Components Manufacturers Private Equity Fund-1-Domestic (IACM-1-D) invested $27 million in a Noida-based multibrand auto service company Carnation Auto India Pvt Ltd, in series A financing.

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