Tata Motors to shut Concorde Motors as part of trimming flab

MUMBAI: Tata Motors is winding up its auto retail business Concorde Motors as part of its strategy to move away from non-core businesses. Set up in the late 90s in partnership with Jardine Matheson’s Jardine Motors, the Concorde retail business over the years has been losing money on account of high costs and low volumes.The company has registered a loss for seven consecutive years with cumulative losses crossing over Rs 366 crore. The winding-up process is in the final stages and it will be consummated before the end of this fiscal year. The company has sold almost all its outlets barring a couple of locations, which too may be executed shortly, say people in the know.Interestingly, this happens at a time when market leader Maruti Suzuki has decided to invest over Rs 1,500 crore annually on acquiring its own real estate for dealership as the high-cost structure in major cities is dissuading many entrepreneurs from entering the auto retail business or take up any new opportunities.Concorde is a fully-owned subsidiary of Tata Motors and has been a one-stop solution to provide sales, service and space parts for the Tata Motors passenger car. The company had 34 showrooms and 17 workshops with a workforce of 2,200 plus employees at end of FY19, which are on the last stage of liquidation.One of the people in the know of the matter said a corporate running a dealership has multiple challenges of governance which also spikes up the cost. “The nimbleness is missing. As against an entrepreneur taking his own calls, the decision-making for a corporate has to follow a certain structured process which adds to the cost and inefficiency. The operational performance of Concorde clearly underlines the issues company faces,” added the person requesting the anonymity.74410198 Tata Motors spokesperson confirmed the development and told ET the company believes the original goals of setting up Concorde have been met and to enable and drive the next phase of growth, the company will move out of the dealership business and focus its resources on the core areas.”The operations of Concorde are being seamlessly transitioned into other dealer partners in the various cities that Concorde is present in thereby building significant scale to their business while our customers will continue to enjoy uninterrupted excellent service,” added the spokesperson.The revenues at Concorde grew annually 12% to Rs 1,215 crore between FY14 and FY19; however, the profits continues to remain under severe pressure. It has posted losses for the last seven fiscal years, according to data compiled from the historical Tata Motors annual report. In FY12, the company posted net profit of Rs 0.70 crore with a turnover of Rs 939 crore.In the past two fiscal years, the company has been Ebitda negative and the overhead costs were higher than gross profit of the company. Beside this, there was substantial increase in working capital requirements, leading to 16% increase in interest costs from Rs 47.38 crore to Rs 54.95 crore. The debt of Concorde stood at Rs 582 crore at end of FY19, out of which Rs 337 crore is secured and the remaining is unsecured.The cumulative losses of the company have been Rs 393 crore between FY15 and FY19, according to data compiled by ETIG from Concorde annual report of FY19.The exit from the company would mean, existing dealers can get a bigger pie of the market which was earlier being shared by the company owned outlets. This may boost dealer viability. Post closure, the revenues wont have an impact on company's financials, however the absolute losses of Concorde wont reflect on Tata Motors standalone business, and thereby it will boost the bottom-line, say people in the know.

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