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Logistics supply provider with global capability

TVS Supply Chain Solutions Ltd. (TVS SCS), est. 2004, a subsidiary of TVS Mobility Group, is a leading integrated supply chain solutions provider in India. With substantial revenue and growth in Fiscal 2023, TVS SCS operates across 25+ countries. Serving 8778 global and 902 domestic clients in FY23, the company caters to diverse sectors such as automotive, industry, consumer products, technology, rail, utilities, and healthcare.

• The Indian and global logistics markets are expected to grow to ~US$385 bn by FY27 at a 13% CAGR from FY 2022–27 and ~US$13.6 trillion by 2026 at a 6.7% CAGR from 2020–2026, respectively (source: Redseer report).

• The company collaborates with 72 Fortune 500 firms. Daimler, Sony, Panasonic, Hero Moto, TVS, and Hyundai Motor are among the clients. In FY23, the top 10 clients generated 38.8% of revenue. Overseas sales account for roughly 70% of the company's revenue.

• Over the past 16 years, TVS SCS has exhibited a history of strategic growth through acquisitions, with more than 20 instances of expanding into Europe, the U.K, the U.S, and the Asia Pacific region.

• TVS SCS witnessed revenue growth from ?6,934cr in FY21 to ?10,235cr in FY23, reflecting a 21.5% CAGR. EBITDA rose from ?387cr to ?684cr during this period, with a FY23 profit of ?41.8cr.

• In FY23, the company had EBITDA and PAT margins of ~6.7% and ~0.4%, respectively, alongside an RoE/ROCE of 5.8%/6.1%, which are expected to improve in the future.

• A Pre-IPO Placement of ?150cr has been executed by the company, involving SBI Life Insurance Co Ltd (?75cr), Allanzers Fin Net Pvt Ltd (?50cr), Western India Logistics Co Pvt Ltd (?10cr), and Satta Securities Pvt Ltd (?15cr).

• At the upper price band of ?197, TVS SCS is available at a P/E of 209x (FY23), which appears aggressively priced compared to peers. However, favourable factors include the fragmented Indian logistics market, growth potential for organized players, post-GST logistics focus, and outsourcing trends. TVS SCS's asset-light approach, diverse global services, long-term contracts, and integrated capabilities position it well for growth. We assign a "Subscribe" rating for the issue on a short- to medium-term basis.

Key Risks

• Around 73% of revenue is sourced from global operations and are exposed to foreign currency exchange rate fluctuations and local-law compliance.

• TVS SCS' asset-light model causes high operational expenses (71% of FY23 revenue), including freight, handling, and personnel. Rising costs may harm cash flows and margins.

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