India’s own Mahindra & Mahindra is looking at its used car business more seriously. FirstChoice Wheels, the subsidiary company, is all set to see an investment of Rs 2 billion in the next five years.
The huge infusion will see FirstChoice expanding its presence in the used car market in India. Mahindra FirstChoice, earlier Automartindia, was one of the first entrants in the used car business in India, with a very popular web presence.
(At this point, normal DWS editorial policies reassert themselves, and hereby announce that the FirstChoice website is crap, however good their brick and mortar stores may be! I was thrilled and imnpressed when the website was launched GodKnowsWhen, and the site has pretty much remained exactly where it was then. Newcomers like carazoo.com have done an infinitely better job of running an online used car site. Okay, now regular polite business story transmission resumes!)
With FirstChoice looking at a possible stock market listing in the next three years’ time, the investment is seen as helping it grow on a bigger level. The company plans to have 300 outlets with presence in 92 cities by 2013. It currently has 70 outlets in 40 cities. FirstChoice Wheels will look at company-owned as well as franchise models while planning the used car business expansion. A sizeable number of outlets would be franchisee stores. There would also be about 30 firstChoice super stores that would act as a one-stop shop for used car buyers.
It may be recalled that FirstChoice Wheels had recently mopped up an amount of Rs 800 million via private placement and preferential allotment for its current expansion. Now, with a five year plan having been charted out, the Mahindras are looking at debt and internal accruals apart from the fund raised to finance expansion.
Mahindras have not, however, decided on how to dilute before the public offer comes up. With the parent now holding as much as 73 per cent stake in FirstChoice Wheels, it is expected to continue being the majority shareholder in the company. FirstChoice has already succeeded in establishing a sizeable presence in the used car markets in North, South and West India. What now remains is the East. FirstChoice is expected to open used car outlets in at least 10 cities in the Eastern region, which will include cities like including Kolkata, Ranchi and Guwahati.
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