About the Company

Founded on 16^th November 2004, TVS Supply Chain Solutions Limited is India’s largest and among the fastest-growing integrated supply chain solutions provider among Indian listed supply chain solutions companies in terms of revenue and revenue growth, in FY 2022-23.

TVS Supply Chain Solutions Limited is a part of the TVS Mobility Group.

The solutions provided by the company can be divided into two segments:-

1. Integrated supply chain solutions (ISCS).
2. Network Solutions (NS).

Services provided under the ISCS segment include sourcing and procurement, integrated transportation, logistics operation centres, in-plant logistics operations, finished goods, aftermarket fulfilment, and supply chain consulting.

Services provided 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.

For FY 2022-23, the ‘ISCS’ segment generated 44.75% of revenue from operations and the ‘NS’ segment generated 55.25% of revenue from operations.

The company is presently operational in 26 countries including India, the United Kingdom, Spain, Germany, Australia, and Singapore.

For FY 2022-23, 29.57% of revenue from operations was generated domestically and the balance 70.43% of revenue from operations was generated from foreign countries.

The company serves numerous industries such as automotive, industrial, consumer, tech, tech infra, rail and utilities, and healthcare.

Industrial and Automotive customers are the largest with 35.35% and 23.17% contributions to the revenue from operations respectively for FY 2022-23. Tech and Tech Infra contributed 11.99%, Consumer contributed 11.74%, Rail and Utilities contributed 5.77% and Healthcare contributed 1.70% to the revenue from operations of the company for FY 2022-23.

Industry Overview

The Indian logistics sector is one of the largest in the world and presents a large addressable opportunity. The sector is critical for the economic growth of the country as it connects various elements of the economy and consists of transportation, warehousing, and other supply-chain solutions ranging from suppliers to end customers.

The Indian logistics market has grown from US$342 billion to US$435 billion between 2018 and 2021 at a CAGR of approximately 8%. This is more than the growth that the Chinese market and the American market experienced during the same period at a CAGR of approximately 4% and approximately 5% respectively. After contracting by 2% in Fiscal 2021, the market witnessed a strong post-COVID recovery in Fiscal 2022 when it grew by 14%. It is projected to grow to US$591 billion by Fiscal 2027.

Organized players accounted for only 5.5-6% of the logistics market segments (which includes road transportation and warehousing and supply chain services only) in Fiscal 2022 which is expected to grow to 12-15% by Fiscal 2027

IPO Objectives

1. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company and its subsidiary TVS LI UK.

2. General corporate purposes

Financials

The company's Revenue from Operations increased from Rs. 6,933.60 Crores in FY 2020-21 to Rs. 10,235.38 Crores in FY 2022-23, showing a CAGR of 21.50%. Similarly, the company's EBITDA expanded from Rs. 386.69 Crores in FY 2020-21 to Rs. 683.65 Crores, with a CAGR of 32.96%. Despite this growth, the company maintained relatively low EBITDA Margins of 5.58%, 6.62%, and 6.68% for FY 2020-21, FY 2021-22, and FY 2022-23, respectively. Moreover, the company faced Net Losses of Rs. 73.90 Crores in FY 2020-21 and Rs. 44.88 Crores in FY 2022-23, although it achieved a Net Profit of Rs. 41.76 Crores in FY 2022-23. The company's ROCE stood at (4.56%) for FY 2020-21, improved to 6.65% for FY 2021-22, and further increased to 7.64% in FY 2022-23. Similarly, the ROE demonstrated negative percentages of (15.15%) for FY 2020-21 and (6.88%) for FY 2021-22, before turning positive at 5.50% for FY 2022-23.

Peer Comparison

Among its peers, TVS Supply Chain Solutions Limited boasts the highest revenue. However, its relatively low EBITDA and PAT margins suggest difficulty in translating these revenues into profits. Additionally, the company's EPS is comparably lower than those of its peers. In terms of ROE, ROCE, and RONW also, the company is trailing behind the industry standards.

Valuation

The company has a PE ratio of 193.14, whereas its peers have an average PE ratio of 42.97. This makes the issue price significantly overvalued. The company's PB ratio is 10.43, and the average PB ratio of its peers is 7.98, which also indicates the overvaluation of the issue price.

Key Risks

1. A significant portion of the revenue is derived from ‘Industrial Segment’ and ‘Automotive Segment.’ For FY 2022-23, 35.35% and 23.17% of the total revenue from operations was derived from Industrial Segment and Automotive Segment respectively. A significant decrease in business from customers in these industries could adversely affect the business operations of the company.

2. In FY 2022-23, foreign currency-denominated loans were 61.77% of total consolidated borrowings. Although there are no negative effects from foreign currency fluctuation till now, potential significant depreciation of the Indian Rupee against these currencies in the future could impact business operations and operating margins.

3. A major part of the company's revenue comes from key customers. Thus, a significant portion of future revenue hinges on maintaining these relationships or finding similar-sized customers. Failing to do so can harm business operations, financial health, and cash flows. For FY 2022-23, the Top 5, Top 10, and Top 20 customers contributed 17.91%, 27.69%, and 38.88%, respectively to the Revenue from Operations.

IPO Details