HEADLINES:
November 20 2019
‘We want to be a $1 bn firm in India by 2021’
03 March 2018

Global capabilities will boost growth, says TVS Logistics MD

In 1996, when R. Dinesh, MD and S. Ravichandran, deputy MD of TVS Logistics Services, started the company, they had never imagined that the firm would grow into an Indian multinational in a few years down the line. From clocking a revenue of ₹1 crore in 1996-97 to becoming a ₹6,000-crore entity, the journey had been long but smooth, thus far. In an interview, Mr. Dinesh spoke about the TVS Group’s foray into the logistics sector.

What made you to foray into logistics?

It was not a group mandate. Ravichandran had returned from Tanzania after an overseas assignment. I knew him and he said logistics was becoming integral for distribution and spare parts. Because I was into these, he wanted me to look at logistics as a division. He came up with the idea and I backed him. We wanted to give it a try. Initially we did not win any business but we also did not spend [a] lot of money.

We did not get business from the group. We got our first business from a U.K. company which is into manufacturing of earth moving equipment. In the first year, we had a turnover of ₹1 crore, including ₹ 60 lakh from the U.K. customer.

After that, we started growing slowly. So, it was not a conscious choice to get into logistics. We thought there was an opportunity and we decided to try. Post 2008, it was very well planned and after 2011, we became serious about the business.

How did you grow to become a company of this size?

Actually, it is an evolution. From 1996 to 1999, we had three to four customers. We got a big breakthrough when one MNC car manufacturer wanted to outsource planning and integration of the supply chain. We had a choice to become an India player waiting to be squeezed by MNCs. But, we decided to be bold and go ahead to acquire companies overseas. So, in 2004 we formed a separate company and that was the time when we wanted money.

In 2008, we got investment from Goldman Sachs. Post that, we did the first overseas acquisition. Initially we bought the company (Rico Logistics) which we ran out of India but we allowed the management team to grow the business and supported them. So, in U.K., after our acquisition, that company has grown at an average of 15 to 16% for 8 years as compared to 2 to 3% by companies in the U.K..

In U.K., we got the know-how for after market. Then, we wanted the know-how to handle production. So, we went ahead to acquire the company (Wainwright Industries Inc.) in the U.S. In India, we were into transportation and then, we forayed into freight forwarding through the investment in TVS Asianics in Singapore. So, now we have capability in almost every sphere of logistics.

So, while it may look that we have grown with acquisitions, it was not acquisition and just not running that business. We have grown the acquisitions as well. All of our acquisitions have grown by 25%.

Integration of different companies begun in 2014 when we started getting know how from U.K. and the U.S. to India. From 2016, integration started getting traction. Now, we are genuinely a multinational company with close to a billion-dollar revenue, 16,000 people across with almost 2,300 people in U.K. 1,100 in Asia, 800 in U.S. So, we have created regional headquarters to manage the companies smoothly.

On expanding in Asia?

We see Singapore as the hub for Asia. The government in Singapore is inviting companies to invest in the logistics sector and the location has capability, especially in freight forwarding side which something we can capitalise on. We committed [an] investment plan of $100 million, most of which has been invested through TVS Asianics. Singapore gives us a natural advantage to expand in Asia and strengthen India-Asia trade.

What is your vision for the company?

We are still an India company. Post-GST, we are getting our global capabilities to India to grow in India and now, post the Pan Asia Logistics acquisition by TVS Asianics in Singapore, to grow in Asia as well. I don’t want to say we want to be $1 billion or $2 billion company, yes we will automatically become that. Our target is to deploy the capability which we have and grow very fast in India and Asia. Ideally speaking, we want to be a billion-dollar company in India by 2021 (from about $370 million now). That is the vision. Globally, we want to grow 25%, means within four years we will double. Theoretically, we will be two-billion dollar company.

Any plans to go public?

You know what has happened with the initial listing by a few logistics companies which are much smaller in size than us. If you ask me, yes we are evaluating but we have not decided.

TVS logistics is strong in auto parts, engineering goods, FMCG and white goods. Are you getting into any new area?

We want to focus on businesses that require technology solutions where we have capability. We can get into high value goods and components which need repair and servicing. We can get into white goods, telecom, technology products and self check out machines and even ATMs. Other than commodities, we are very serious about every other sector. We want to do only value-added services. We don’t want to run a logistics firm like all the 100 other people are running.

We have to ensure that we can reduce the waste in the system thereby we can reduce the cost of the customer who would prefer to stick to us.

How much investment you have made so far?

It is not a very big amount. It could be $250 million.

Are you looking for any new investor?

No. TVS, which is the majority stakeholder along with equity partners Goldman Sachs, Tata Opportunity Fund and CDPQ (which manages the Canadian Pension Funds), are committed to any future equity investment. We are not looking for any third party investment. (KKR had exited)

How many acquisitions have been made so far?

Almost close to 20 from 2008 onwards, including 10 large acquisitions. Large, meaning companies whose turnover is more than $50 million and $70 million.

 

 

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