TVS Supply Chain Solutions Ltd IPO

Published by Sharekhan Education | August 10, 2023

Amit Pathak | Sharekhan Education

TVS Supply Chain Solutions Ltd IPO has an issue size of Rs.880 Cr and price band of Rs.187-197. The issue opens on Thursday, 10th August 2023 and closes on Monday, 14th August 2023. 

Company Overview :

The company is an Indian supply chain logistics solution provider that has global capabilities. Its operating segments consist of Integrated Supply Chain Solutions (ISCS) and Network Solutions. ISCS includes sourcing & procurement, logistics operation centers, integrated transportation, in-plant logistics operations, finished goods, and aftermarket fulfillment. Network Solutions include Global Forwarding Solutions and Time Critical Final Mile Solutions. Their customers span industries such as automotive, industrial, consumer, tech, utilities, and healthcare. The company is promoted by TVS Mobility Group, one of the reputed business groups in India.

Objects of Issue :

The IPO consists of a fresh issue of equity shares aggregating to ₹ 600 crore and an offer for sale (OFS) of up to ₹ 280 crores by existing shareholders. The company will use the proceeds from the fresh issue to repay certain outstanding borrowings and pursue an inorganic growth strategy.  Investors must apply for a minimum of 76 shares and in multiples thereafter.   Investors must apply for a minimum of 76 shares and in multiples thereafter.

According to the Redseer Report and Armstrong Report, the Indian logistics market is anticipated to grow at a 13% CAGR over FY22-27.  The sector exhibits high fragmentation and lacks organization. Strong underlying economic growth driven by domestic manufacturing, consumer spending, urbanization, a favorable regulatory environment, a digital economy, and improvements in India’s transportation infrastructure will propel the growth in the Indian logistics sector. Within the overall supply chain services market, the integrated supply chain services segment is an evolving segment requiring bespoke supply chain solutions. The demand for complex integrated solutions is driving enterprises to increasingly seek a single or smaller set of more strategic third-party logistics service providers.

Competitive Strengths : 

The company acts as a complete ‘one-stop’ solution for customers from sourcing to distribution through their end-to-end capabilities. Their technology-led supply chain solutions specialize in reducing friction in the supply chain. Their solutions are targeted towards consistently delivering higher efficiencies, higher accuracy meeting and achieving customers’ performance indicators. The company’s long-term contracts and asset-light business model allow them to adapt across the economic cycle, reducing costs during downturns and expanding quickly in growing markets. The company is led by an experienced management team that has the expertise and vision to manage and grow its business.

Business Strategy :

The company aims to expand its engagement with existing customers by offering value-added solutions and bundled logistics services. They aim to keep investing in technology to optimize labor and inventory management and improve visibility into fulfillment. The company intends to continue to implement innovations and learning from one geography to other regions. Their acquisition strategy continues to target businesses that enhance their capability, increase their geographical presence, and increase access to a growing customer base.

Key Concerns :

The company is dependent on network partners for warehouses and vehicles. They must acquire and renew regulatory permits, licenses, and approvals to operate their business. They are exposed to foreign currency exchange rate fluctuations. The company may encounter claims concerning loss or damage to cargo, personal injury, or other operating risks that lack sufficient insurance coverage. They operate in a highly competitive industry.

Financials :

The company has registered operating revenue growth at 21.5% CAGR over FY21-23. EBITDA has grown at 26.3% in the same period. The company has turned profitable at the bottom line in FY23 after reporting losses in previous years. Return on Equity stood at 5.5% in FY23. At the upper end of the price band (₹187-197) the issue is reasonably priced at EV/EBITDA multiple of 13.2x based on FY23 post-issue fully diluted EBITDA. (Source – IPO Red Herring Prospectus)

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