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Chennai-based TVS group is known for its conservative approach, relying mostly on greenfield projects and its own capabilities for growth. But one group company is turning out to be an outlier.
Ten-year-old TVS Logistics Services is pursuing an aggressive acquisition strategy to become a $1-billion company by next year from a Rs 3,000-crore (around $475 million) company now.
So far, TVS Logistics has invested over Rs 700 crore on acquisitions, with the Tata group's logistics arm, Drive India Enterprise Solutions, or DIESL, being the latest.
For logistics companies, scale is of essence in order to become a profitable enterprise. It should at least have revenue between Rs 5,000 and Rs 6,000 crore, say experts. To acquire scale and capabilities, R Dinesh, managing director of TVS Logistics, says more acquisitions will be made in India and other Asian countries.
"Acquisitions will help the company transform itself from a service partner to a knowledge partner," says S Ravichandran, executive director, TVS Logistics.
DIESL will help TVS Logistics diversify its base to consumer durables and the FMCG sector. At present, 95 per cent of TVS Logistics' revenue comes from the automobile space. The goal is to increase the share of the non-auto space to 50 per cent in the years to come.
DIESL, an integrated supply chain provider with a turnover of Rs 953 crore, has presence in 7,000 towns and has 189 warehouses across India. Some of its major clients include Colgate, Cadbury, Amway, Voltas, Sony, Philips, Godrej, Walmart, Titan, Tata Motors and Hyundai.
Since 2004, TVS Logistics has acquired 14 companies, 12 of them overseas. These buyouts have helped the company fine-tune its last-mile delivery and add new capabilities like demand forecasting and technology logistics.
The acquisition of UK-based Multipart Holding in 2009, for instance, improved the company's supply chain management. Right from sourcing of components and demand forecasting to selecting the supplier and delivering it to customers, is now done with the help of an integrated software.
Similarly, RICO Logistics, a same-day courier company with clients such as Dell and IBM, enables TVS Logistics to deliver replacement parts for automobiles within two hours of getting the order.
The quick delivery is achieved through a combination of mother warehouses, forward stocking locations, pick up and drop points. "In some cases, we deliver parts to the boot of the engineer's vehicle or in the lockers. Field engineers need not visit the warehouse to pick the parts," says Dinesh.
If TVS Logistics is to become a $1-billion company and increase the share of non-auto revenue, it needs to showcase its capabilities, says Dinesh.
While experts agree on the benefits of inorganic growth, they say the company needs to spread its wings faster than it is doing at present. Also, they say to become a multinational company, it will have to rope in an expert from outside India at the management level.
