Deep Dive: All eyes on TVS SCS as much awaited IPO hits the floor


TVS Supply Chain Solutions, a division of the TVS Mobility Group, announced back in July this year about raising funds via an Initial Public Offering (IPO). And as the IPO is being launched today, the company’s strategic move sent ripples through the supply chain industry. The market sentiment says that TVS SCS is poised to leverage its IPO launch to solidify further its position in the ever-evolving supply chain landscape. Adding to the excitement is the fact that it is the first TVS Group company to go public in the last 29 years.

Going into the details, the IPO consists of two parts: a fresh issue of new shares worth up to INR 600 crore and an offer for the sale of existing shares by some shareholders. The offer for sale includes shares from different individuals and companies. Yesterday was the anchor investor bidding date and the offer closing date has been fixed for August 14, 2023. The price band has been fixed at INR 187-197 for the INR 880 crore initial public offering (IPO), valuing the company at INR 8,700 crore.

In the OFS segment, Omega TC Holdings PTE Ltd will sell up to 10.73 million shares, Tata Capital Financial Services Ltd up to 9.84 lakh shares, Sargunaraj Ravichandran up to 5.80 lakh shares, Andrew Jones up to 4 lakh shares, Ramalingam Shankar up to 3.15 lakh shares and Ethirajan Balaji will sell up to 2.5 lakh shares. JM Financial, Axis Capital, J P Morgan India, BNP Paribas, Nuvama Wealth Management and Equirus Capital are the book-running lead managers to the IPO.

TVS SCS’ IPO will be used to raise funds to fuel its expansion plans and accelerate its ongoing digitization efforts. The company will also use the fresh issue funds (worth INR 600 crore) to repay the debt of the company and its subsidiaries TVS LI UK and TVS SCS Singapore. As of March 2023, TVS group’s total borrowings on a consolidated basis were at INR 1989.62 crore.

The IPO is expected to include both fresh issuance of shares and an offer for the sale of existing shares, providing an opportunity for investors to be part of the company’s growth journey. Market experts anticipate that the IPO’s success will not only inject substantial capital into the company but also trigger a domino effect of renewed investor interest in the logistics and supply chain sector.

According to sources, at the upper price band of INR 197, TVS SCS is available at a price-earnings ratio of 209 times (FY23), which appears aggressively priced compared to peers. However, the favorable factors for TVS include the fragmented Indian logistics market, growth potential for organized players, post-GST logistics focus, and outsourcing trends.

Even though the overall sentiment is quite positive, experts warn of the risk associated with the company’s IPO. For instance, TVS SCS’ revenue – more than 70% of which is sourced from global operations – is vulnerable to foreign currency exchange rate fluctuations and local law compliance. Also, 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. The company derives a significant portion of its revenue from customers engaged in certain industries. So, any loss or a significant decrease in business from customers in these industries could adversely affect its business.

As of March 31, 2023, the company managed 27,218,541 sq ft of logistics warehouse space, all obtained through lease arrangements with network partners and/or provided by customers. However, the inability to renew these lease arrangements may have an adverse impact. The company is also currently involved in outstanding litigation proceedings involving the company itself, its directors, promoters, and subsidiaries.

Several key factors have converged to make TVS SCS’ IPO a strategic move. First and foremost is the company’s visionary leadership, helmed by an executive team renowned for its forward-thinking approach. Additionally, as global disruptions highlighted vulnerabilities in traditional supply chain models, businesses are now more determined than ever to fortify their operations with resilient and adaptive solutions. TVS SCS, with its focus on harnessing cutting-edge technologies like AI, IoT, and blockchain, is well-positioned to be the partner of choice for companies seeking to future-proof their supply chains.

As TVS SCS embarks on this new chapter with its IPO launch, the supply chain industry as a whole stands on the cusp of transformation. The pandemic-induced disruptions have accelerated the adoption of automation, data-driven insights, and agile supply chain models. TVS SCS’ ability to harness these trends and tailor them to meet client needs positions the company as a catalyst for change within the industry.

Founded in 2004 as a subsidiary of the renowned TVS Group, TVS SCS has since grown and spans over 50 countries with a comprehensive suite of services, including transportation, warehousing, distribution, and aftermarket solutions. The company’s unwavering commitment to efficiency, sustainability, and technological advancement has earned it quite a reputation, making its IPO an event of great interest and significance, which is quite evident with the kind of excitement brewing in the market.

TVS SCS stands at the threshold of an exciting era, ready to shape the future of supply chain management on a global scale. As investors, stakeholders, and industry observers eagerly await the outcome, one thing is clear: TVS SCS’ IPO is a bold declaration that the supply chain landscape will never be the same again.

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