On 27 September 2013, Carnation Auto India Private Limited took a loan from Punjab National Bank (PNB). Of Rs 105.75 crore. Sometime in April of 2015, the company started defaulting on its payments. As of March 2016, the company owed PNB close to Rs 116 crore. Rs 105 crore principal, Rs 5 crore in unpaid interest and Rs 6 crore in interest provision. This wasn’t the only default. Carnation had been running on fumes for a while, and for whatever little miracle it was hoping for, it had issued convertible debentures to IFCI Venture Capital Fund. It needed to pay back Rs 71 crore in the year 2016. This included premium on redemption of Rs 43 crore. Believe it or not, in the books of accounts, Carnation hadn’t even made a provision for this amount. Perhaps even if it did, it wouldn’t have made much of a difference, except on paper. Because the company has no money at all. To meet any of its debt repayment obligations.

Not a surprise then that last week, PNB filed an insolvency petition for Carnation Auto with the National Company Law Tribunal (NCLT).

As you are reading this story, Carnation has entered the Insolvency & Bankruptcy Code (IBC) process. Over the next 180 days, the company will try and arrive at a settlement with its lenders. There are only a few options on the table. A. Existing shareholders, Khattar and his investors, Premji Invest and Gaja Capital bring in more capital in the company and settle the monies due, whatever amount is agreeable. B. A new investor comes in, one who sees value in Carnation and arrives at a settlement with the creditors, and then decides whether to run or shut down Carnation. C. There is no interest in the company and the creditors decide to liquidate the assets of the company, for whatever it is worth.    

There is no easy way to say this. Jagdish Khattar found his calling in the automobile industry in the year 1993. In a short span of six years, he grew to become the managing director of Maruti Suzuki, the largest car maker in the country, by market share. In his tenure at the top, Maruti’s revenues more than doubled, from Rs 9000 crore ($1.5 billion) in the year 2000 to Rs 22,000 crore ($3.4 billion) in 2008. In that time, Khattar became the most recognisable face of Indian auto. Simply put, the industry loved him back, many times over. So maybe it is only fitting that in the end, the automobile must consume him.

Another matter altogether that Khattar is not alone. The automobile has been at the centre of a lot of new businesses in India for a good decade now. With millions of dollars in funding and a garden-variety of entrepreneurs hoping to solve a simple problem.

A not-so-new-car of a problem

The beauty of a not-so-new-car of a problem lies in its simplicity.


Ashish K. Mishra

Ashish edits and writes stories at The Ken. Across subjects. In his last assignment, he was a Deputy Editor at Mint, a financial daily published by HT Media. At the paper, he wrote long, deeply reported feature stories. His earlier assignments: Forbes India magazine and The Economic Times. Born in Kolkata. Studied in New Delhi – B.Com from Shri Ram College of Commerce, Delhi University. Works out of anywhere, where there is a good story to be told.

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