TVS Logistics Services Ltd (TVS LSL), part of the T.V. Sundram Iyengar Sons group, is looking to buy logistics firms in southeast Asia, a region that offers an opportunity worth $500 billion to $600 billion given its strong manufacturing sector, a top company official said.
The Chennai-based firm is in talks with freight forwarding companies in Malaysia, Singapore and Thailand, TVS Logistics managing director R. Dinesh said in an interview. He said the targeted companies would be worth about $150 million to $200 million.
“We are looking for acquisitions not for revenue growth but for enhancing our ability to serve our customers better,” Dinesh said. He also said the firm is looking at acquisitions in the home market but that “will be incidental” and not necessarily a driver towards being a billion-dollar company by 2021.
With its global revenue crossing $1 billion, TVS LSL is setting focus firmly on its India operations to achieve its billion dollar revenue target in the country, the company said in a statement on 29 August.
The company has also restructured its business and appointed R. Shankar as chief executive of its India operations. TVS LSL closed the year ended March 2017 with a turnover of Rs 1,900 crore.
Dinesh said besides other factors, growth will be boosted by the implementation of the goods and services tax (GST) which opens up a lot of opportunities for organised logistics firms. “From a customer standpoint, there’s an awareness that supply chain is no more a cost but a strong differentiator,” he said, adding that the urgency to cut supply chain and make it more efficient has never been so great.
Vikram Suryavanshi, vice president-equity, at Phillip Capital India Research, said that while GST augurs well for organized logistics firms, particularly ones that have good brand recall, the actual benefits will kick in only after a couple of years, once the companies have settled into the new tax regime and reworked their supply chain strategy.
“There are still changes being made to tax rate,” he said, adding that companies in the manufacturing sector are in the process of doing a cost-benefit analysis in terms of warehousing and raw material strategy. In India, close to 60% cargo is transported by road, a sector that is largely unorganized. Whatever overseas acquisitions TVS LSL made in the last decade will now be leveraged as customers prefer to work with firms that have global expertise, Dinesh said.
“Till now we were either a labour contractor or a transporter,” said Dinesh.
Through a combination of the organic and inorganic route, the Caisse de Dépôt et Placement du Québec (CDPQ)-backed firm, which started off as a logistics provider only to the TVS group of companies, has developed into an integrated logistics services firm for sectors including automobile, beverages, information technology, healthcare, telecom, retail, consumer goods and defence, with a presence in 14 countries.
Among other factors, the acquisition of Tata-controlled Drive India Enterprise Solutions Ltd in 2015 has paid off well and helped TVS LSL grow at 30% even as it led the company into non-auto sectors. Auto now accounts for only a third of the firm’s revenue as against 90% in 2015.
Source: Mint