Ravi Viswanathan, Managing Director, TVS Supply Chain Solutions

10 Aug 2023 , 09:40 AM

Why do you suggest that retail investors should subscribe to the IPO?

TVS SCS is India’s leading and pioneering multinational company. We pioneered the concept of three PL in India we have the domain competency which we have acquired through very strategic acquisitions. Earlier in our journey in 2008 and 2012, we used that very effectively to integrate the company and bring in significant qualitative difference in the way we manage our business.

We are a customer centric company and have over 72 Fortune 500 customers. The growth of our top five, top 10, top 20 customers over the last three years has been quite impressive. Today, the top 20 customers contribute about Rs. 4,000 Crore of revenue, which talks a lot about our approach of customer centricity. It also brings into focus the fact we have built relevant capabilities and cross deploy them in our customers’ businesses. We follow a strategy called the C Cube strategy, which is country, customer and capabilities, for a customer. We sell multiple capabilities for a customer. We sell in multiple countries and that is providing a great fillip.

During FY20 to FY23, our revenue has grown from Rs. 6,600 Crore to Rs. 10,235 Crore. Similarly, our EBITDA has expanded from Rs. 243 Crore to Rs. 683 Crore. So we have been enhancing the quality of our customers, we have been growing our revenue and we have been expanding our EBITDA expansion over the last three years. Last but not the least, our India business has also been growing rapidly. We provide a combination of our domain knowledge that we have gained in deploying solutions across the globe and our technology is helping us in winning large contracts. So in that sense, our company is unique and differentiating.

Who are your large, listed and unlisted peers, particularly India based companies? The concentration risk seems high as far as revenue from large clients is concerned, help me understand how are you managing this risk?

Our business is divided into industrial, automobile, tech and tech infra and consumer durables, healthcare and others, and energy and utility segments. So, we have a very well diversified portfolio. In terms of our customers, one thing that stands out is our renewal rates which are very high, indicating our long-term relationships with customers. If you take the average relationship that we have with our customers, the top 10 customers have been with us for more than 10 years. And from a concentration perspective, in the Integrated Supply Chain business, the top 20 customers contribute about 56% of our revenue and on the Network Solutions side, the top 20 customers contribute about 35% of our revenue. So it is a well-diversified set.

We compete with different set of competitors in different markets. In India, we typically compete, with the likes of Mahindra, Delhivery, TCI, among others and internationally in the freight business we are competing with the global majors whether it’s DSV, Equinox and the likes and in the various regions.

So help us understand, how are you using technological advancements as well as innovations to strengthen your economic moat?

That is a great question. We have a very strong team of technically qualified people in India who are building our own tech stack which is used in all our deployments. We have a stack called Visibility which is a comprehensive warehouse management platform. We have a platform called I loads which is an integrated transportation platform. We have an end-to-end platform called Msys which encompasses call of the modules, including EDI into customer systems. We integrate with customer platforms like SAP, JD Edwards, among others. We use latest technologies like the drone technology in our warehouses. We have deployed ASRS which is Automated Storage and Retrieval Systems in several projects of our customers. We have Augmented Reality based systems. We use a platform called Light Guide. So yeah, we continuously keep looking at deploying the latest technology in all our solutions. We are a solutions company, which means that we are building a solution for our customers every time and then the solution has three components. It has got the strong domain capability that we bring. The second is the very, very strong knowledge that we have acquired over so many years of working with leading customers. And 3^rd is the technology coming in as part of a solution. If I were to illustrate an example, you know, if you visit one of our operations in Hosur, you can actually find us deploying visual computing as a tool to ensure that we have 0 defects in our CKD packaging and shipment for one of our large customers. So we continuously keep looking at technology from a partnership perspective with respect to cutting edge products that we see in the market which we integrate with our own stack to provide these solutions to our customers.

Can you enlist the top large macro opportunities for your company? 

The Indian logistics market presents a large addressable opportunity, with direct spends on logistics of US$216 billion in Fiscal 2020 and US$180 billion in Fiscal 2021 due to the pandemic. The market has recovered to reach US$205 billion in Fiscal 2022 and is expected to grow to approximately US$385 billion by Fiscal 2027 at a CAGR of 13% from Fiscal 2022 to Fiscal 2027. Out of this market opportunity, the size of the outsourced supply chain solutions market (excluding e-commerce) in Fiscal 2022 was US$7.5-7.7 billion, which is expected to grow at a CAGR of 20-22% to approximately US$20-21 billion by Fiscal 2027.

Demand for supply chain solutions in industrial sector is projected to grow from US$1.0-1.5 billion in Fiscal 2022 to US$3.8-4.3 billion in Fiscal 2027. Estimated at US$56 billion in FY22, ecommerce comprises approximately 6.1% of the total retail market in India. The ecommerce market is projected to grow at 25-27% year-on-year between Fiscal 2022 and Fiscal 2027.

We play in the ecommerce fulfilment space and we are a very strong player in the production supply chain space. So that gives us a lot of it plays into our strengths.

How do you plan to utilize the proceeds raised from the IPO?

One of the major objectives of the IPO is repayment of our long term debt. Going forward, we will only have working capital loans on our books. Repayment of debt actually creates headroom for growth. We will have greater ability to bid for large contracts once the debt is paid off.

Give us an overview of your strategy on Environment, Social and Governance (ESG)?

ESG and responsible business conduct is an absolute requirement with most of our large clients and we continue to score very well on this front. We have our ESG measures in each of the markets. If you visit some of our facilities, you will find that alternate energy is replacing traditional energy. We have a focus group which is looking at ESG and you will see more of it as we go forward.

From a regulatory standpoint, what are the opportunities for companies like yours?

I believe GST has done a lot of good as a whole within the entire sector. We are really excited about implementation of the National Logistics Policy, more importantly given that a lot of digitization is happening and the ability for our systems to integrate with these national frameworks and make available data both for our own computation and also to increase the transparency of what is going on in our business with our customers, in a lot of opportunities, especially on the digital side from my India perspective. So we are pretty excited about what’s going on with the NLP and in the interesting forums around that.