IT major Wipro's promoter Azim Premji is investing Rs 80 crore (Rs 800 million) to acquire a significant minority stake in a company floated by Jagdish Khattar, former managing director of Maruti Suzuki India who has recently turned entrepreneur.
Khattar, who floated Carnation Auto, has planned an investment of Rs 1,000 crore (Rs 10 billion) in the next five years to launch a countrywide multi-brand automobile sales and service network.
Besides Premji, who will invest in the company through his investment fund PremjiInvest, IFCI Ventures has also committed Rs 28 crore (Rs 280 million) to the company, for a minority stake. Khattar joins the growing club of auto professionals who are turning entrepreneurs.
This club includes BVR Subbu, former president of Hyundai Motors India Ltd, who set up Argentum Motors to contract-manufacture for large carmakers. Subbu has also floated another company, Altius Autoworld, in a joint venture with Japanese giant Gulliver International to provide after-sales service for luxury cars and heavy commercial vehicles.
For Premji, Carnation makes his second investment within a couple of weeks. He had bought 10 per cent in low-cost retail chain Subhiksha for around Rs 230 crore (Rs 2.3 billion).
Carnation Auto will be launching its service and sales network hubs in 100 locations in 65 cities in the next five years.
"By the end of this financial year, we will be launching at least half-a-dozen auto solution hubs in the National Capital Region, Hyderabad and Cochin. In the next financial year, we plan to launch 25 to 30 such hubs across India," Khattar, who is chairman and managing director of Carnation Auto, said.
These multi-brand sales and service hubs are mostly targetted at new automobile manufacturers, especially those with limited market share and capacity constraints.
Currently, over 80 per cent of the sales and service network market share in India is held by Maruti, Tata Motors and Hyundai together.
The company will initially focus on providing service, mechanical repair and body shop solutions. Khattar said, "After the warranty period of vehicles, over 80 per cent of car users avail of services outside their manufacturers' network. So we are seeing a huge growth opportunity in that unorganised space for our multi-brand sales and service network."
He also said Carnation might sign agreements with German auto component major Bosch for sharing its service network across the country. To support its service and sales model, the company has launched its wholly-owned subsidiary called Carnation Realty that will focus on investing in key properties for the parent company.
The company also plans to set up an automotive training institute. To induct skilled and trained manpower, the Automotive Training Institute will work closely with government, original equipment manufacturers and other industry bodies to bring in best practices with the latest technology and expertise.