TVS Logistics version 2.0 is about scale and expansion

The third-party logistics service firm is the first Indian company to sign a Defence Procurement deal worth 2 billion pounds that will save 500 million pounds to the government over 13-years. At a press conference, here on Wednesday, R Dinesh, MD, TVS Logistics, said the company instead of remaining a pure auto segment player, had made diversification as its core focus area. “In 2011, auto constituted 100 per cent of our business but now, less than 30% of business globally comes from this segment,” he said, while re-affirming that as far as India is concerned a significant focus will be on tapping the Defence business. 

Dinesh said the new partnership struck with Caisse de depot et placement du Quebec (CDPQ) comes after an eightyear relationship with Goldman Sachs and KKR, who have exited completely by diluting their joint stake to the TVS family members and management. Though he did not divulge the details of the stake ownership, he said Rs 200 crore had been invested to buy the stake. TVSL is looking at a turnover of Rs 5,700 crore for the current financial year up from last year’s figure of Rs 4,200 crore. Thereafter it is hoping to triple it in the next three to five years, Dinesh said, highlighting the company’s preparedness for the next growth phase. This could be the final phase of being a private company as it is “always open” to going public. “IPO is one more phase of the organisation… they (CDPQ) will continue to support us with or without the IPO status,” was his response to a query. 

The logistics player has been organically growing at 10 to 15 per cent in the UK and other locations. The current partnership, Dinesh said, is in line with its second phase of growth where the strategy is gain access to customers unlike the association with Goldman Sachs and KKR that was more about market exposure and knowledge. “Version 2.0 is about scale and expansion where we are working with customers and not for knowledge,” he sought to explain. 

Apart from the equity investment, CDPQ is ready to commit significant additional capital to finance transformative acquisitions and support the domestic company’s effort to position itself as a true multinational. TVSL has a significant presence in the UK and in the US, with its business in the former location showing a sevenfold growth in the last five years from 40 million pounds to 275 million pounds. Asked about China, Dinesh said TVSL had a small presence there, but the Dragon Nation is about scale. “Geography for geography is not our purpose,” he pointed out. Earlier, Michael Sabia, President and CEO, CDPQ, through a video call, said TVSL is a dynamic company which had been making meaningful inroads into Europe and other locations. 

“It is not just a shipping company but a logistic company that is able to grasp and understand the complexities of the business,” he said, describing TVSL as a “smart” business operator which can respond to the global market trends owing to its amazing engineering abilities. Anita Marangoly George, MD, South Asia, CDPQ, said the logistics cost constituted 13 to 14 per cent of the GDP, due to disaggregation and impediments. 

So, it made sense to partner with TVSL which offered the comfort of working together and fitted with CDPQ’s mandate to identify “the best investment opportunities in the South Asian markets.” CDPQ used Bain Capital and other advisory firms to seal its deal with TVSL and its other investments in India include the power and financial sectors – Tata Power and ICICI Ventures, Edelweiss and Azure Power. The transaction with TVSL is pending approval with the Competition Commission of India (CCI).