I believe market will value our business better: Landmark Cars chairman | Mint
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Business News/ Companies / News/  I believe market will value our business better: Landmark Cars chairman
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I believe market will value our business better: Landmark Cars chairman

Sanjay Thakker, chairman, Landmark Cars, tells Mint in an exclusive interview that the promoter family will be holding onto the majority (55%) of their shares.

Sanjay Thakker, chairman, Landmark CarsPremium
Sanjay Thakker, chairman, Landmark Cars

NEW DELHI : Private equity firm TPG Growth is set to offload a portion of its stake in India’s leading car dealership network, Landmark Cars, through an initial public offering (IPO). The IPO is set to raise 552 crore ($75.8m), with TPG expected to reduce its stake to 11-12% in the company, from the current 29%. The IPO will make Landmark Cars the only listed car dealership network in India. The promoters will also offload a small portion of their stake, though Sanjay Thakker, chairman, Landmark Cars told Mint in an exclusive interview that the promoter family will be holding onto the majority (55%) of their shares. The IPO comes as the premium and luxury car market in India has begun to recover after the impact of the covid-19 pandemic. Edited excerpts:

How do you feel about the valuation Landmark is getting at this time? What will your post-IPO shareholding structure be?

TPG invested in Landmark eight years ago and currently holds a 28-29% stake in the company. However, their fund life has now come to an end and they need to return the money to their investors. The IPO is primarily being done for that reason. It could have happened at a later stage when our profitability and track record were even better, but we had to adhere to a certain timeline. Additionally, the market is starting to understand that premium and luxury cars are doing well, so the environment is good for an IPO. The secondary issue of 402 crore will be predominantly by TPG, with some angel investors also participating. As for our family, we will continue to hold 55% of the shares after the IPO. Initially, we planned to offload 60 crore worth of shares, but have now reduced it to just 10 crore, the bare minimum we needed, because we don’t think it’s good to sell at the current valuation.

You aren’t happy with the valuation then?

I will be happier with the valuation going ahead when I believe the market will value our business better. TPG will have 11-12% post the issue, they also realize there is no gain in selling their entire stake and that the good times have just begun.

There is no domestic precedent in the form of a listed car dealership company at present. What’s the upside for investors and how should they evaluate the business?

In many countries, whether it is America or China, Europe, or even South America, there are listed dealerships, and they have been in existence for a while. Autonation in America, for instance, which is the best known that listed in 1990 at $110 million market cap. It went on to create $13 billion. China has over half a dozen listed dealership chains. So if India has to become the third largest auto market, which it is going to be, we need some organized players, how much can a family-run management bandwidth and capital take you? So if the India automotive story has to happen, it is high time that this happened. In fact, it’s too late, maybe there should have been many more before us.

Indian dealers have also had a great obsession with buying real estate and taking on debt for it. The markets don’t like that. These tendencies have to change.

In India, dealership agreements are often considered lopsided in favour of OEMs. Does that pose a potential threat?

This is where a model dealership agreement comes in. The dealers fraternity is moving ahead with it, and all OEMs are favourably considering it. This is an industry wide issue, and people have not paid much attention to it, but they should. So the agreements will only get better from here. Objectively, there is no risk due to this to our business. Our dealership agreements have always been renewed with rational terms.

The portfolio of brands you’re in are all in the luxury to premium bucket - Mercedes Benz, Jeep, VW, Honda - do you think with this you miss the volume gains that’ll take place as India’s mass market moves towards premiumization with mass market brands?

Growth in the dealership business depends on the number of dealer partners a particular OEM has. Many mass market brands are in the market share battle and are over-dealered. We want to be a meaningful player and run a profitable business. Generally, just because a car is premium, it doesn’t make it profitable for a dealer, one has to be clear about what would be the share of the pie for us in this segment, and then take a decision. So there is no blanket yes or no in terms of whether we will bring on board more brands. But we will play in the luxury and premium PV space. We don’t see we have the risk from our OEM partners adding more dealers at the risk of our profitability.

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ABOUT THE AUTHOR
Alisha Sachdev
Alisha Sachdev is an assistant editor with Mint based in Delhi. She reports on the auto and mobility sector, with a special focus on emerging clean mobility technologies. She also focusses on developing multimedia properties for Mint and currently hosts the 'In A Minute' series and the Mint Primer podcast. Previously, she has worked with CNBC-TV18 and NDTV.
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Published: 14 Dec 2022, 10:49 PM IST
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