Mumbai: Neeraj Gupta, founder and managing director of Meru Cab Co. Pvt. Ltd, plans a return to his roots by setting up a dedicated workshop that will maintain and repair the company’s 1,700-strong taxi fleet in Mumbai, thus saving on costs and improving efficiency.
The workshop, which is to be set up in the suburb of Mira Road, may eventually alsoservice non-Meru cars, said Gupta, who will float a new company for the venture along with India Value Fund, the private equity investor that has an 80% stake in Meru.
“The new company would be having the same shareholding pattern of 20:80 (with Gupta holding one-fifth of the equity). This new workshop is expected to bring down the maintenance cost by 20-25% and increase efficiency by 5-7%. We are working on separate branding for this venture,” he said in an interview.
Gupta had begun his business career by borrowing Rs50,000 from his airhostess wife in 1998 to start a chain of workshops, which were dubbed as “elite” ventures, to differentiate them from regular mechanics. This evolved into a transport company that serviced call centres and subsequently into Meru.
Spreading wings: Neeraj Gupta will float the venture with India Value Fund, the private equity investor that has an 80% stake in Meru.
The new venture may stem driver complaints that the current maintenance schedule is time-consuming. The service centre, land for which has already been acquired, is expected to start functioning in two months.
The concept may be replicated in the other cities where Meru operates, in Delhi, Hyderabad and Bangalore, Gupta said, declining to reveal the investment figures for the venture.
If Gupta’s plan is executed fully, it will follow a similar project by former Maruti Suzuki India Ltd boss Jagdish Khattar, who set up a chain of workshops after retiring from India’s biggest car company under the brand name Carnation Auto India Pvt. Ltd.
Khattar had raised first-round funding of Rs108 crore from PremjiInvest and IFCI Ventures.
“I see no reason why people would not opt for such third-party garage services provided there are quality services at a reasonable rate,” said Vishal Sharma, managing director and chief executive officer at Tuscan Ventures Pvt. Ltd, a Mumbai-based venture capital firm that focuses on the logistics sector.
“Since Meru has strong brand recall, the logic for garage services is compelling. The organized garage service will offer economies of scale and scope,” he adds.
Meru owns nearly 4,500 cabs in the four cities, most of which are painted a distinctive metallic green.
India Value Fund, which manages assets worth more than $650 million (Rs2,996.5 crore), picked up its equity stake in Meru in 2006.
While Chlorophyll Brand and Communications Consultancy worked on the branding, Accenture Plc advised Gupta on his business model.
The firm’s key current aim is to build up its fleet and it may sell shares at a later date.
“As of now, we have no plans to go public. We will go for it at a later stage. Now the idea is to have 10,000 vehicles by 2012-13,” Gupta said, adding that his company also has plans to enter cities such as Pune, Chennai and Ahmedabad.
There were no plans to enter overseas markets in the near future, although he had made a survey of the Bangladesh market, Gupta said.