Carnation Auto raises Rs 85 crore from PE firm

by 29 Feb 2012

A 30,000-square feet property in Ludhiana is the latest addition to multi-brand car servicing company Carnation Auto’s expanding network. Inaugurated on February 23, it is the company’s 24th hub overall, and fourth in Punjab. Since Carnation began, it has, on average, added eight new outlets every year. But that’s far from having tapped available potential.
The organised, independent servicing business still accounts for a small share in the servicing industry, whose share is estimated to be Rs 20,000 crore. This is where the latest round of funding that Carnation raised comes into play.
Mumbai-based private equity firm Gaja Capital Partners has invested Rs 85 crore in the company. Earlier, Carnation had raised Rs 108 crore from Premji Invests and IFCI Ventures, and Rs 170 crore funding from Punjab National Bank. According to Gaja Capital Partners’ website, this is its first investment in an automobile business.
Carnation, which has a strategic tie-up with component major Magneti Marelli, is also investing in new- generation equipment to meet the demand from technologically advanced cars.

“The investment is essential as the latest equipment enables proper diagnosis, reduces turnaround time and also helps reduce the costs of repair to a certain extent. Some tools which were used a decade ago are now not so relevant,” says Jagdish Khattar, chairman, Carnation Auto.
Carnation has invested in equipment like the Auto Robot, which is a crash repair system and helps in bringing the car up to 90 percent of its original shape post-accident. Miracle Dent repair is another machine which helps in repairing dents and thus reduces replacement of parts. Carnation has the latest scanners as well, which can diagnose the problem in the car by using smart chips and computers.
“When it comes to investing in tools and equipment, my team strongly believes in having the best and hence we have bought the best-in-class,”adds Khattar. Infrastructure has also been invested in accordingly. For example, the Ludhiana outlet, with 60 technicians and support staff, has 40 service bays for general service and accidental repairs with a capacity to service more than 70 cars every day.
Every month, Carnation sees over 20,000 footfalls on an average in its network spread across 16 cities. Given the existing car population, Carnation will have to reach many more locations and also have multiple outlets in a single city/town. The company is now planning to also expand through the franchisee route.
With the growing and emerging markets for vehicles, at what rate is your company’s network growing?
We are a three-year-old company as far as operations go. In this time frame we have set up 24 service workshops, 12 pre-owned car sales centres, 50 workshop on wheels as well as launched other verticals like e-business. We have also applied for a broker license for insurance.
Do you face challenges in recruiting skilled manpower for the workshops? Skilled manpower is an issue that plagues the entire value chain, right from manufacturing to service and repair. We are investing resources in manpower training and building a mix of trainees and experienced manpower. With our expansion gaining momentum, we plan to establish independent regional training centres. Carnation has observed that because of our business model, the market value of our skilled manpower increases and our centres become good poaching grounds for premium cars’ service network!
How do you compete with the authorised workshops of various OEMs?
We believe in providing good and honest service. Over 300,000 cars have been delivered from our workshops and are testimony to the fact that there was a need and a gap in the market. I feel that we are not necessarily competing with the OEM workshops as the demand is far greater than the infrastructure that exists. Especially with more OEMs flooding the market, demand and the need for third party service chains only stands to increase. In any case, many customers tend to move out of the OEM network after the free warranty period is over. We are a good alternative.
Do you see any scope for expansion of workshop equipment in the future to meet the growing needs of OEMs and customers?
With the improvements in car technology and car owners’ increasing needs, technology has to move with the times. We have seen this with the quick service facility where basic servicing is done in an hour. The scope is immense and I am sure that foreign brands entering India will bring with them new techniques and equipment and set new benchmarks.
The more important factor is the convenience car owners want. They do not have the time to visit workshops and spend an entire day getting their cars serviced. In that context our Workshop on Wheels is hugely popular.