TVS
Supply Chain Solutions (TSCS), a part of TVS Mobility Group (earlier part of
erstwhile TVS Group), is a leading integrated supply chain solutions provider
that has global capabilities and network across the value chain with cross
deployment abilities. Its deep domain expertise and global expertise coupled
with technology enables it to develop and offer customized solutions to
customers’ thereby empowering agile and efficient supply chains at large scale.
Its customers span across numerous industries such as automotive, industrial,
consumer, tech and tech infra, rail and utilities, and healthcare. Solutions
offered by the company can be divided into two segments i.e. (i) integrated supply chain solutions (ISCS);
and (ii) network solutions (NS). In FY23, about 44.75% of the revenue come from
ISCS segment and 55.25% come from NS. Its
capabilities under the ISCS segment include sourcing and procurement,
integrated transportation, logistics operation centers, in-plant logistics
operations, finished goods, aftermarket fulfillment and supply chain
consulting. Its
capabilities under the NS segment include global forwarding solutions (GFS),
which involves managing end-to-end freight forwarding and distribution across
ocean, air and land, warehousing and at port storage and value-added services,
and time critical final mile solutions (TCFMS) which involves closed loop
logistics and support including spares logistics, break-fix, refurbishment and
engineering support, and courier and consignment management. The
customer base of the company for its supply chain solutions in FY2023 stood at
8788 (down from 11546 in FY2021) globally and 902 (down from 1120 in FY21) in
India. The company has added an
aggregate of 1,179, 152 and 177 new customers (i.e., new customers who the company
did not provide any services in the immediately preceding year) in Fiscals
2021, 2022 and 2023, respectively. Moreover,in Fiscal 2023, its global customers
included 72 (up from 54 companies in FY21) ‘Fortune Global 500companies and its
Indian customers include 25 (up from 24 in FY21) Fortune Global 500 companies.
In addition, TSCS added about 16 ‘Fortune Global 500 2022’ companies in Fiscal
2023. In
Fiscal 2023, TSCS provided ISCS services to 412 customers (comprising 308
customers in India & 104 customers in RoW) and provided NS services to 8376
customers (594 customers in India& 7782 customers in RoW) spanning across
industries such as automotive, industrial, consumer and tech and tech infra. Overall,
it provided supply chain solutions to 8,788 customers globally in Fiscal 2023. As
part of its business development strategy, it has focused on expanding the
scope of its customer engagements and, thereby, focused on larger customers and
disengaging with smaller opportunistic customers, particularly in the NS
segment. Accordingly, its total number of customers serviced globally has
decreased from Fiscal 2021 to Fiscal 2023. Its
key customers in India include Daimler India Commercial Vehicles Pvt Ltd., Sony
India Private Limited, Hyundai Motor India Limited, TVS Srichakra Limited, TVS
Motor Company Limited, Panasonic Life Solutions India Private Limited, Hero
MotoCorp Limited, Modicare Limited, Ashok Leyland Limited, Yamaha Motor India
Private Limited and Torrot Electric Europa, S.A. Some
of the customers with whom it have had long term relationships as of March 31,
2023 include Sony India Private Limited (12 years), Hyundai Motor India Limited
(13 years), Johnson Controls-Hitachi Air Conditioning India Limited (3 years),
Ashok Leyland Limited (17 years), TVS Motor Company Limited (17 years), Diebold
Nixdorf (8 years), TVS Srichakra Limited (10 years), Lexmark International
Technology Sarl (6 years), VARTA Microbattery Pte Ltd (7 years), Daimler India
Commercial Vehicles Private Limited (12 years), Hero MotoCorp Limited (8
years), Modicare Limited (7 years), Panasonic Life Solutions India Private
Limited (12 years), Dennis Eagle Limited (17 years), Electricity North West
Limited (5 years), Yamaha Motor India Private Limited (7 years) and Torrot
Electric Europa, S.A. (3 years). Operations
of the company have, over the years, significantly grown and as of March 31,
2023, it has presence in 26 countries including India, United Kingdom, Spain,
Germany, Australia and Singapore. Of its FY2023 revenue about 29.57% is from
India and balance 70.43% is from rest of the world (29.67% from UK, 13.37% from
Europe excluding UK, 7.15% from North America, 8.59% from Australia & New
Zealand and 11.65% from others). The
company as of March 31, 2023, managed 27218541 square feet of logistics
warehouse space (22,532,509 sft in India; 4686032 sft overseas). In Fiscal 2023, the company carried 2,074
tons of air freight and 32,720 TEU of sea freight in India and it carried
28,524 tons of air freight and 74,558 TEU of sea freight in the rest of the
world (i.e., geographies other than India). The
majority of lease agreements for its warehouses have tenure of three and eight
years. TSCS
provides solutions and services to meet its customers’ supply chain management
and logistics requirements. As part of its engagement with customers, customers
outsource portions of their supply chain to TSCS to improve their efficiency
and to better manage their resources. For instance, TSCS provided purchase
services, assembling of component and parts, kitting, and using of packing
materials for a global wind turbine company. TVS
Supply Chain Solution’s market share in the organized sector in the supply
chain solutions industry in terms of revenue was approximately 7% in Fiscal
2022.
The Issue, Objects of the offer The
issue comprises both fresh issue and offer for sale. While fresh issue comprises
new equity shares aggregating upto Rs 600 crore and that of offer for sale
comprises sale of 14,213,198 Equity Shares by selling investor selling
shareholders and other selling share holders.
Of
the net proceeds from fresh issue about Rs 525 crore will be used to prepay all
or a portion of certain borrowings availed by the company and its UK Subsidiary,
i.e., TVS LI and balance for general corporate purposes. Total
consolidated borrowings of the company as of March 31, 2023, was Rs 1989.616
crore million. Strength Critical
scale with global network in a fast-growing and fragmented third-party
logistics market in India End
to end supply chain solutions enabled by
domain expertise, global network
and knowledge/technology base across multiple geographies and customer sectors.
Large
customer base across industries both in India & RoW offers opportunity to
maximize wallet share. Moreover, it developed long-term relationships with many
clients, which provides resilience to its revenue and profitability. The
company operate an asset-light business wherein its warehouses (primarily
comprising after market warehouses, dedicated consumer product and retail
warehouses, multi-client facilities and national distribution centres) and
vehicles are operated through leases with its network partners. Moreover, it
also manages customer owned/ leased warehouses. The company believes that its
asset-light model has enabled it to expand to geographically dispersed
locations, scale up volumes, optimize loads and maintain flexibility in
handling seasonal variations and changes in client requirements. Long
and consistent track-record of successful integration of acquisitions to support
capabilities and service delivery. Its
revenues are diversified in terms of customers, geographies, and industries. It
serviced 8,788 customers globally in Fiscal 2023 spread across 26 countries in
Europe, United Kingdom, Asia-Pacific and North America, and industries such as
automotive(23.17% of revenue), industrial (35.35%), consumer(11.74%), tech and
tech infra (11.99%), rail and utilities(5.77%), healthcare (1.7%) with balance
10.28% by others. Weakness Operating
in a highly competitive and fragmented logistics industry,especially some
segments, such as transportation, warehousing and freight forwarding etc. Moreover,
freight forwarding business revenue is also impacted by fluctuations in global
freight rates. The
Top 5/10/20 customers accounted for 17.91%/27.69%/38.88% of the revenue from
operations in FY23 and thus any loss of key customers will adversely impact the
operations/financials of the company. Out
of the 684 properties leased by the company (on a consolidated basis) as of
March 31, 2023, 11 properties have been leased from related parties, i.e., TVS
Industrial & Logistics Park, TVS Mobility and TVS Automobile
Solutions. Promoters
of the company have entered into a non-compete agreement dated January 29, 2021
(Non-Compete Agreement) with the other TVS families, wherein the family members
as well as their controlled entities have inter-alia agreed to not undertake
any business which competes with that of another TVS family group for a period
ranging from 36 months to 96 months from February 4, 2022, depending on the
nature of business. This restricts the
company if desires, from diversifying into existing business of the other TVS
family groups for the non-compete period.
Certain
of its material subsidiaries such as Rico Logistics of UK have incurred losses
in the preceding Fiscals and may incur losses in the future. Moreover, the
company has extended certain corporate guarantees on behalf of its
subsidiaries, TVS Logistics Investment UK Ltd (TVS LI UK) and TVS Supply Chain
Solutions Pte. Ltd. (TVS SCS Singapore) and pledged 100% of its shareholding in
TVS LI UK, in relation to the working capital and term loan borrowings availed
by TVS LI UK and TVS SCS Singapore. As of March 31, 2023, the total amount of
such corporate guarantees was Rs 1629.243 crore. Moreover, the ability of the company to
turnaround loss-making overseas subsidiaries needs to be seen given global
economic headwinds and geopolitical risks. In
the last three fiscals an average of about 72.99% of its revenue from
operations and 73.87% of its borrowings are in foreign currencies and thus any
fluctuations in foreign currency will have an impact on the results of
operations of the company. Net
trade receivables as of March 31, 2023, was Rs 1234.253 crore or 12.01% of its
total consolidated revenue from operations. Global
economic headwinds impacting manufacturing sectors in developed countries
especially Europe.
Valuation Consolidated
revenue for the fiscal ended March 2023 was up 11% to Rs 10235.38 crore with
India revenue up 24% to Rs 3026.71 crore. Revenue from RoW was up 6% despite
decline in global freight rates which was largely offset by new customer
addition and higher volume from existing customers. But
with operating profit margin expand by marginal 10 bps to 6.7%, the operating profit was up by 12% to Rs 683.65
crore. Other income was up 51% to Rs 75.63 crore and thus the PBIDT was up 15%
to Rs 759.28 crore. After accounting for higher interest and higher
depreciation, the PBT was down by 3% to Rs 45.28 crore. EO expense was down 72%
to Rs 10 crore and thus the PBT after EO was up 204% to Rs 35.28 crore.
Taxation was a write back of Rs 1.70 crore against a provision of Rs 58.43
crore. Thus, the PAT was profit of Rs 36.98 crore against a loss of Rs 46.81
crore. The share of profit from associates was up 148% to Rs 4.78 crore. Thus,PAT
of continuing business was RS 41.76 crore against a loss of Rs 44.88 crore. The
net profit after MI was eventually stood at Rs 39.81 crore against a loss of Rs
49.10 crore. On
post issue fully diluted equity (on upper price band) the EPS for FY23 was Rs
1.1 and the PE works out to 179.1 times. However, more established logistics
players such as TCI express, Blue Dart Express and VRL Logistics quote at a TTM
PE of 40.9 times, 40.7 times and 18.9 times respectively of their FY2023
consolidated EPS. Mahindra Logistics quotes at a PE of 102.7 times. EV/Sales
for the company is 1 timesas compared to 0.7, 2.5, 3.1, 4.5, 4.6 times in case
of Mahindra Logistics, VRL Logistics, Blue Dart Express, TCI Express and
Delhivery.
TVS Supply Chain Solutions: Issue
Highlights
|
|
Sector
|
Logistics
|
Fresh Issue (in Rs Crore)
|
600
|
Offer for sale (in equity share
nos.)
|
14213198
|
Price band (Rs.)
|
|
Upper
|
197
|
Lower
|
187
|
Post-issue equity (Rs crore)*
|
|
in Upper price band
|
44.40
|
in Lower Price Band
|
44.56
|
Post-issue promoter (including
promoter group) stake (%)
|
43.40
|
Minimum Bid (in nos.)
|
76
|
Issue Open Date
|
10-08-2023
|
Issue Close Date
|
14-08-2023
|
Listing
|
BSE, NSE
|
Rating
|
45 /100
|
|
|
* fullydilluted for equity warrants
yet to be exercised.
|
TVS Supply Chain Solutions: Re-stated Consolidated Financials
|
|
|
|
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
|
Sales
|
6933.60
|
9249.79
|
10235.38
|
|
OPM (%)
|
5.6
|
6.6
|
6.7
|
|
OP
|
386.69
|
612.56
|
683.65
|
|
Other income
|
66.09
|
50.15
|
75.63
|
|
PBIDT
|
452.78
|
662.71
|
759.28
|
|
Interest
|
175.60
|
154.95
|
190.34
|
|
PBDT
|
277.19
|
507.77
|
568.94
|
|
Depreciation
|
443.28
|
461.05
|
523.66
|
|
PBT
|
-166.10
|
46.72
|
45.28
|
|
EO Exp
|
-48.27
|
35.10
|
10.00
|
|
PBT after EO
|
-117.82
|
11.62
|
35.28
|
|
Tax
|
-42.52
|
58.43
|
-1.70
|
|
PAT
|
-75.30
|
-46.81
|
36.98
|
|
Share of Profit from Associates
|
1.40
|
1.93
|
4.78
|
|
PAT from Continuing Biz
|
-73.90
|
-44.88
|
41.76
|
|
Profit/Loss of discontinued Biz (net
of tax)
|
-2.44
|
-0.92
|
0.00
|
|
Minority Interest
|
-2.00
|
3.30
|
1.95
|
|
Net profit
|
-74.34
|
-49.10
|
39.81
|
|
EPS (Rs)*
|
-2.3
|
-4.3
|
1.1
|
|
* on post IPO fully dilluted equity
(on upper price band) of Rs 44.40 crore. Face Value: Rs 1
|
EPS is calculated after excluding EO
and relevant tax
|
|
|
|
|
|
Figures in Rs crore
|
|
|
|
|
|
Source: Capitaline Corporate
database
|
|
|
|
|
|
|