Carnation to enter private label spare parts segment

Carnation Auto, the used car sales and service franchisee operator, established by Jagdish Khattar, former managing director of Maruti Suzuki, plans to get into private label automobile components.

The number of Carnation franchisees recently crossed 100. The company aims to expand the network to 150 by March and add another 150 outlets in FY18.

Backed by Premji Invest, IFCI Ventures and Gaja Capital, it wishes to find strategic investors, Khattar said. Carnation started in 2008 with a company-owned and operated network of pre-owned cars. In the next couple of years, it gave up this capital-intensive model and took a franchisee route. It then also ventured into setting up a service network and then tweaked it to a franchisee model.

"A strategic player is important. There is a huge opportunity to get into private labelling of parts. We might start Carnation branded parts. We won't manufacture but will source these from tier-II and tier-III component makers, and supply through our platform. That will be a huge revenue generator. By the end of FY18, we should be launching private labels," said Kunal Khattar, senior vice-president.

Jagdish Khattar, still chairman and managing director, said the existing investors had been supportive. "We have worked out a plan to reach the targets," he said.

Carnation raised its first round of funding of Rs 108 crore from Premji Invest and IFCI Ventures.

"People in the industry recognise that we have restructured and reorganised. We have turned asset-light and created a platform that many in the automobile industry can use as distribution channels or points of presence. This can be leveraged by somebody who is in the industry. We are discussing things," said Kunal Khattar.

The company said its experience in servicing cars for nearly eight years had given it insights on fast-moving components.. Carnation is now present in the Delhi region, Uttar Pradesh, Rajasthan, Maharashtra and Gujarat. It is adding eight outlets every month, mostly by converting existing workshops, after making them meet the required standards.

"We are profitable at the operating level. We have a very small burn at the corporate level, as we are expanding the network. We should exit FY17 with a profit at Ebitda (operating earnings) level," said Kunal Khattar.

Carnation has also a deal with Ola to service the latter's fleet of cars. The cab aggregator also directs drivers on its platform to Carnation as a service option. The company has also tied up with Policy Bazaar and sells automobile insurance policies through its network. The online insurance service comparison portal also promotes Carnation to its customers.