PremjiInvest and IFCI Venture Capital are investing Rs 108 crore ($23 million ) in Carnation Auto, a company floated by former managing director of Maruti Suzuki India, Jagdish Khattar. PremjiInvest, which is Wipro Chairman Azim Premji’s private equity investment firm, is putting in Rs 80 crore to acquire a significant minority stake. IFCI Venture Capital recently announced Rs 400 crore Automotive Component fund.
The stake diluted is reported to be somewhere around 25-30%, with Carnation Auto being valued at Rs 350 crore. Khattar is setting up a chain of multi brand auto distribution and services outlets, along the lines of AutoNation of the US. It plans to offer services like maintenance, insurance, CNG/LPG retrofitment, accessories etc. under one roof for various brands. The total investment in the business is expected to be Rs 1,000 crore.
Over the next five years, Carnation Auto plans to establish its footprint in 65 cities through 100 locations across the country. Carnation is looking at a mix of franchise model and joint venture model. Khattar plans to set up a separate real estate company, Carnation Realty, which will buy land for the proposed outlets. This entity would have its own separate investors. Carnation plans to open six outlets in National Capital Region, Hyderabad and Cochin this year, which would later be increased up to 30 in the next year.
Another player in this space, Mahindra FirstChoice, Mahindra & Mahindra’s multi-brand service chain, recently sold a 10% stake to to Phi Advisors for about Rs 80 crore. FirstChoice also has big expansion plans in this segment, which is highly unorganised. Ex-Hyundai chief in India BVR Subbu’s Argentum Motors, which has been backed by DE Shaw and IL&FS, has also tied up with a Japanese group Gulliver International to foray into this segment.
Khattar, who was the CEO of Maruti Suzuki in India for 10 years, is among one of the senior corporate executives who are beginning their life as entrepreneurs. George Zacharias of ex-Yahoo (backed by Sequoia), and Rashmi Barbhaiya of ex-Ranbaxy (backed by Tata Group) are some of them. Interestingly, typical private equity and venture capital funds missed out on the Khattar deal.