US-based Cox Automotive buys stake in Mahindra First Choice
The transaction, through a secondary sale, saw one of Mahindra First Choice's early investors, HDFC, selling its entire stake. Phi Advisors, an initial private equity investor in the company, sold a part of its stake..
Cox Automotive with $17 billion annual revenue owns AutoTrader, the largest digital automotive marketplace in the US, and vehicle research platform Kelley Blue Book. Mahindra First Choice owns IndianBlueBook.com, an online vehicle valuation company.
"There is an enormous global synergy building in this space. It is not a money-raising exercise. It is about bringing a strategic input," said Mahindra Chairman Anand Mahindra. "It is not about an IndianBlueBook versus Kelly Blue Book at some point of time. This is the might of the Kelly Blue Book being thrown behind the IndianBlueBook," he added.
Mahindra First Choice had raised Rs 94 crore from San Francisco-based hedge fund Valiant Capital in March. The deal gave Valiant a 13.36% stake, valuing the company at about Rs 700 crore at the time.
Mahindra First Choice is one of the few companies in this space in India to be profitable. It reported a profit of Rs 1.92 crore on revenue of Rs 44 crore in fiscal 2015. According to Chief Executive Nagendra Palle, revenue is expected to hit Rs. 70 crore this year.
Rajeev Dubey, CEO of the Aftermarket Sector at Mahindra, who has negotiated with Cox for about a year now on the deal, said the company doesn't want to dilute its stake in the unit. "We've enough cash and even though we are growing, we haven't used the cash invested by Valiant, yet," he said.
Cox's entry would help "widen and deepen" Mahindra First Choice's products, Dubey said. "Each of (Cox) products has scope for deepening and widening, the adjacencies," Dubey added.
"Our investment in Mahindra First Choice Wheels, furthers Cox Automotive's strategic plans to create and grow used-vehicle marketsplaces," said Joe Luppino, chief corporate development officer at Cox Automotive. "This opportunity allows us to partner with a company in the fast-growing Indian automotive market."