TVS Supply Chain Solutions Limited

TVS Supply Chain Solutions Limited has filed DRHP on May 3, 2023 to raise funds through IPO. The IPO consists of Fresh Issue and Offer for Sale both. The size of fresh issue is Up to [●] Equity Shares aggregating up to ₹ 750 crore and the size of Offer for Sale is Up to 20,007,160 Equity Shares aggregating up to ₹ [●] crore. As part of OFS, the major selling shareholders are Omega TC Holdings Pte.

Ltd, Tata Capital Financial Services Limited, Sargunaraj Ravichandran, Andrew Jones and Ramalingam Shankar. 

Business Model of the Company

TVS Supply Chain Solutions Limited is among India’s largest and fastest growing integrated supply chain solutions providers in terms of revenues in Fiscal 2022, according to the Redseer Report. The Company is an India based multinational company, who pioneered the development of the supply chain solutions market in India according to Redseer Report. The Company was promoted by the erstwhile TVS Group, one of the reputed business groups in India (Source: Redseer Report), and is now part of the TVS Mobility Group. For more than 16 years, the Company has managed large and complex supply chains across multiple industries in India and selected global markets through customized tech-enabled solutions. During this period, the Company has grown significantly. Its total income was ₹9299 crore in Fiscal 2022.

The Company is the only differentiated Indian supply chain logistics solution provider to have global capabilities and network across the value chain with cross deployment abilities. The technology coupled with its deep domain expertise and global expertise enables it to develop and offer customized solutions to customers’ thereby empowering agile and efficient supply chains at large scale.

The solutions spanning the entire value chain from sourcing to consumption can be divided into two segments: (i) integrated supply chain solutions (“ISCS”); and (ii) network solutions (“NS”). The capabilities under the ISCS segment include sourcing and procurement, integrated transportation, logistics operation centers, in-plant logistics operations, finished goods, aftermarket fulfillment and supply chain consulting. The capabilities 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. 

Object of the Issue

Offer for Sale

Each of the Selling Shareholders will be entitled to their respective portion of the proceeds from the Offer for Sale in proportion of the Equity Shares offered by the respective Selling Shareholders as part of the Offer for Sale after deducting their proportion of Offer related expenses and relevant taxes thereon. The proceeds of the Offer for Sale shall be received by the Selling Shareholders and will not form part of the Net Proceeds. The Company will not receive any proceeds from the Offer for Sale. 

The Fresh Issue

The Company proposes to utilize the Net Proceeds towards funding of the following objects:

1. Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the Company and its Subsidiaries, TVS LI UK and TVS SCS Singapore
2. General corporate purposes.

Further, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including the creation of a public market for the Equity Shares in India.

Risks in the IPO

Dependent on third party for certain operations 

The Company is  dependent on network partners and other third parties in certain aspects of the operations and unreliable or unsatisfactory services provided by them or failure to maintain relationships with them could result in a disruption in the operations of the Company, which could have an adverse effect on the business, financial condition, results of operations and cash flows of the Company. 

Highly reliant on Technology 

The Company is highly reliant on the technology infrastructure and software suite in the business operations, and any disruption or failure of the technology infrastructure could materially and adversely affect the growth prospectus, reputation, business, results of operations, financial condition and cash flows of the Company. 

Subjects to foreign exchange risk

The operations of the Company are spread across 26 countries across the world, as of December 31, 2022, and accordingly, the Company derives a significant portion of its revenues from outside India, which is denominated and transacted in foreign currencies and is subject to foreign exchange risk. The Company is exposed to foreign currency exchange rate fluctuations and the results of operations have and will be impacted by such fluctuations in the future.

Risk of losing customers 

The Company typically enters into long-term agreements with its customers and if its key customers do not renew their agreements with it, or expand the scope of services, the Company provides to them, or if its long-term relationships with the key customers are impaired or terminated, the business, financial condition, results of operations and cash flows could be adversely impacted of the Company. 

Dependent on customers from specific industry 

The Company derives a significant portion of its revenue from customers engaged in certain industries, and a loss of, or a significant decrease in business from customers in these industries could adversely affect the business, results of operations, financial condition and cash flows of the Company. 

Financial Performance

As per the financial statements of the Company, the total revenue in 9MFY23 of the Company was Rs. 7919 crore and the total expenses during this period was Rs. 7863 crore. The profit before tax of the Company was Rs. 59 crore while the profit after tax of the Company was Rs. 54 crore in 9MFY23. In FY22, the total revenue of the Company increased 32% to Rs. 9299 crore as against Rs.  6999 crore in FY21. The total expenses in FY23 also increased 29% to Rs. 9253 crore as against Rs. 7165 crore in FY21. The loss before tax of the Company decreased 792% to Rs. 13 crore as against Rs. 116 crore in FY21.  During FY22, the loss after tax of the Company decreased 39% to Rs. (44) crore as compared to Rs.  (73) crore in FY21. 

In FY22, the total assets of the Company was Rs. 5789 crore as against Rs. 4990 crore in FY21. During this, the total equity and liabilities of the Company was Rs. 5789 crore as against Rs. 4990 crore in FY21.

In FY22, the net cash generated from operating activities of the Company was Rs. 621 crore as against Rs. 712 crore in FY21. The net cash used in investing activities of the Company in FY22 was Rs. 380 crore as against Rs. 63 cash generated in FY21. During this period, the net cash generated from financial activities of the Company in FY22 was Rs. 217 crore as against Rs. 1167 crore cash used in FY21. In FY22, the cash and cash equivalents at the end of the year of the Company was Rs. 993 crore as compared to Rs. 536 crore in FY21.