FEATURES/Big Bet | Oct 19, 2012 | 21531 views

Ex-Maruti Man Jagdish Khattar Aims High with Carnation

Will Jagdish Khattar's new game plan win against the neighbourhood garage?
Ex-Maruti Man Jagdish Khattar Aims High with Carnation
Image: Amit Verma


s the managing director of Maruti Udyog, Jagdish Khattar had proved his detractors wrong, and how.

An Indian Administrative Services officer, he had joined Maruti in 1993, and had become its managing director in 1999. Between 2000 and 2008, the company’s revenues more than doubled—Rs 9,000 crore to about Rs 22,000 crore—while profits rose more than five times, from Rs 330 crore to Rs 1,730 crore. Industry experts predicted that Maruti would have a tough time against global majors like General Motors, Ford, Fiat and Honda. But Khattar proved them wrong.

It is yet to be seen if Khattar can prove his detractors wrong, once again, with his four-and-a-half-year-old venture Carnation.  

On January 3, 2008, 66-year-old Khattar turned entrepreneur, and started Carnation Auto. Although the initial idea was that of a multi-brand car showroom, over the past four years, Carnation’s business proposition has undergone multiple changes. And Khattar remains far from success: With a turnover of just over Rs 130 crore, the company is yet to make any profit. In fact, with a turnover of about Rs 81 crore in FY2011, it recorded a loss of Rs 52 crore.

A critical cog in Khattar’s efforts to make Carnation a success is the speed at which he can decide on a clear business proposition for it. From being a multi-brand dealership for new cars, it got into the business of multi-brand car service. Now, Carnation has ventured into selling used cars, and wants to sell accessories and insurance as well.

But what exactly does Khattar want Carnation to be?

From his recent moves, it can be said that he wants Carnation to deal in and service cars that are no longer covered by the manufacturer’s warranty. He wants a share of every rupee a car owner spends when his car is no longer new.

While success is still not guaranteed, this business plan gives Carnation a better shot at it.


Under One Roof
At present, someone looking to buy a used car goes to Mahindra First Choice or Maruti True Value, or a local player like Popular Cars or Sah & Sanghi in Mumbai and TS Mahalingam in Chennai. For servicing the car, owners look to neighbourhood garages, whose rates are lower than the authorised outlets of manufacturers. And when he wants to sell his car, he either goes back to a used car dealer, or sells it on his own.

All these are usually unrelated transactions.

Khattar is aiming to aggregate all these needs of a car owner under one brand. But what is the size of the market that he is looking at?

Say, for instance, if a million new cars were sold in India in 2010, by 2012 none of them would be covered by the manufacturers’ warranty. Of these, 65 percent (6.5 lakh cars) would not return to the manufacturer’s authorised service centres, and enter the unorganised market for services and repairs. Khattar wants at least 10 percent of this market.  

PE investors Premji Invest and IFC Ventures had invested Rs 104 crore in Carnation in 2008, and Gaja Capital Partners invested Rs 84 crore in 2012.

Khattar’s current business model increases the chances of cross-selling services, and reduces competition with car manufacturers. Globally, car companies are not comfortable with the idea of a multi-brand showroom.

In a move favouring consumers, the European Union passed a legislation called the ‘block exemption’ rule, allowing multi-brand car sales and services within the EU in 2003.

But manufacturers remain averse to the idea for two reasons: Complexities arising out of allowing various brands—including rivals—to be sold in the same showroom; and the fact that they do not make huge margins on sales.

A far greater source of profit is after-sales services. A 2003 McKinsey report found that net profits from spare parts sales, service contracts, financing and insurance subsidise new car sales; after-sales business accounts for almost 60 percent of gross profits.

Inch Deep, Mile Wide
Now that Khattar has moved away from his original idea of a multi-brand dealership for new cars—and is therefore not in direct competition with manufacturers—car companies might be a little more accommodating.

A walk around Carnation’s workshop in Kurla, Mumbai, puts this into perspective: An Audi A4 is being painted in the paint booth; a Mahindra Xylo is undergoing serious repairs after having met with an accident; a Fiat Premier Padmini (more than 20 years old) is undergoing complete restoration; three Honda vehicles are in queue, along with a Mitusbishi Cedia (whose parts are not stocked even by authorised dealers) and about 15 other vehicles from different manufacturers.

This article appeared in the Forbes India magazine issue of 26 October, 2012
Post Your Comment
Email Address
Required, will not be published
All comments are moderated
Comments (6)
Niks May 4, 2015
Worst place to buy a used car. I bought a car from here (Gurgaon near bus stand below TVS showroom), and they assured me that this car is totally checked by our technical experts and you will never face any issues. Just after a month engine oil consumption goes too high, when I checked my car I came to know that it`s engine goes down and company is claiming a bill of around 1 lakh. I call their advisor and experience was pathetic. I don`t know what kind of technical expert they have, who doesn't even know that car engine is in bad condition and they approve such cars.
Sumit Sep 27, 2014
Company full of liars ,the worst experience of my life.They took car one month back adit met with accident ( not major). I m continuously calling from 1 month .,everytime I call they give different n new reason. Every person at Gurgaon carnations branch gives new lie the time you call.They said ur condenser is damaged from last 1 month,then they said its old model so not available in market.they forced me to search on my own n tell them .i enquiry in vipul n they gave me no.of Alva auto spares Gurgaon.They said its available.I called then told its available m again after 2 days they told condenser is ok.Actually fan not working.

I came to know from other person in carnation that they have repaired it n they r hiding from me.Senior Management doesn't pick ur calls n junior workers fight among themselves.They also forced me to visit carnations n talk which is far from my place.They kept my licence fot 20 days overturned after I almost forced them to do so.BIG NO TO CARNATIONS.IT'S BIG INEFFICIENT N TOTALLY Flop.i hope many r saved by this mail so only wrote my experience.
Rohit Singh Rawat Apr 17, 2014
definitely he is going to win the challenge because he has shown his ability in the past. The good thing is his opinion is straight forward which includes purely truth, trust and tremendous task.
Bhasker Joshi Mar 12, 2013
Carnation service costs are the same as those of any company branded service outlet while at the same time their service is pathetic in comparison and they are never able to find replacement parts. I wonder how this company has sustained for so long. I took my cars there for service once and thereafter decided never to visit them again... yet they keep calling every few days to remind. Some cheek
Parameswaran Nair Nov 14, 2012
This is great idea and am sure it is deliverable
Gowrisankar Oct 24, 2012
This is good idea but need the mass reach across the country
Like this article? Subscribe to Forbes India
Just give us your mobile number and we will get in touch with you
Most Popular
Insta-Subscribe to
Forbes India Magazine
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
click here to Subscribe Online