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Thursday, March 25, 2010

Mahindra First Choice looks at IPO in three years

Mahindra First Choice Wheels, the company that was created by Mahindra & Mahindra for trading in used cars and is currently jointly owned by M&M, HDFC and a PE fund, is looking at an IPO in about three years, according to Rajeev Dubey, President (HR, After-market & Corporate Services), Mahindra & Mahindra.

He did not want to disclose the name of the PE, but earlier media reports have it that Phi Advisors, an India-based PE, picked up 10% in the company in 2008 for Rs 80 crore.

Mahindra First Choice Wheels is today a Rs 400-crore company. It would have sold over 18,000 cars in the current year, compared with 10,250 last year, and expects its sales to double next year.

Today, the company announced a tie-up with MyTVS, the services business arm of TV Sundram Iyengar & Sons, under which anyone who buys a car from Mahindra First Choice can avail himself of the ‘roadside emergency services' of MyTVS free of charge in the first year of the vehicle purchase.

MyTVS has a 2,500-strong service network in 1,400 towns and cities “which implies that we can reach out to customers in distress wherever they may be,” said R Dinesh, Joint Managing Director, TV Sundram Iyengar & Sons.

Shubhabrata Saha, Chief Executive Officer, Mahindra First Choice Wheels, noted that the dynamics of the used-car business was changing with customers opting to deal with organised players as opposed to local dealers. Proof of this is the fact that Mahindra First Choice's sales are growing 80-100% annually, while the market is growing around 20%. Saha said B and C class towns are seeing a lot of action which will “provide depth and penetration to our business.” He said these cities do not have organised players and consequently buyers and sellers go to brokers, who mostly do not have the same capabilities as an organised player — in terms of choice of models and bundling finance and other services.

These smaller cities and towns, therefore, are on Mahindra First Choice's radar. The company today has 118 outlets and intends to double it over the next year.

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