TVS Logistics Services Ltd. (TVS LSL) has inked a deal to acquire 100 per cent stake in Tata-controlled Rs.953-crore Drive India Enterprise Solutions Ltd. (DIESL) for an undisclosed sum.
The deal, however, is subject to all regulatory clearances. It will not only make TVS Logistics the largest 3PL (third party logistics) firm in India with total revenue of about Rs.4,000 crore, but also help the company have a larger play in the non-auto segment with new capabilities.
The acquisition is also expected to put the company on a better wicket for tapping opportunities arising out of current e-commerce boom as DIESL brings with it a strong warehousing network with last-mile delivery capabilities.
Interestingly enough, TVS Logistics has roped in a Tata-related private equity fund to part-finance the acquisition. The rest of the money for the buy will be funded from internal accruals.
A part of the $7-billion TVS Group, TVS Logistics is expected to see a fund infusion of around Rs. 250 crore through a minority stake sale to Tata Opportunities Fund. The Tata fund is the third private equity fund to pick up a minority stake in TVS Logistics.
“This coming together of TVS Logistics and DIESL is going to be a real game-changer going forward. Also, it is a profitable deal and will add 25 per cent additional revenue to our top line,” said R. Dinesh, Managing Director of TVS Logistics.
“From the Indian logistics industry’s perspective, profits of Indian companies have been lower when compared with their peers in other markets. But this combination gives us an opportunity to be a profitable venture,” he added.
“ The deal is going to be a real game-changer going forward in the 3PL space. It will enable us to add to our already expanding base of non-auto customers,” said R. Dinesh, Managing Director, TVS Logistics Services Ltd. ”
DIESL has strong presence in consumer durables, FMCG (fast moving consumer goods), retail and technology industries. It has 189 warehouses across India with a total warehousing space of 6.5 million sq. ft. It has a vast warehousing network in North and Eastern India, which will be a good fit with TVS Logistics, which has presence in South and Western India. Overall, TVS Logistics has three million sq. ft. of space.
“TVS and Tata share common values of trust and fairness, and enjoy good relationship, particularly in the automotive space. The deal is a mutually beneficial one,” said K.R.S. Jamwal, Director of DIESL.
With DIESL, jointly owned by Tata Industries and Tata International Ltd., the business of TVS Logistics will have an equal mix between auto and non-auto.
Thus, the Rs.3000-crore TVS Logistics will be in a position to increase its coverage across segments of logistics supply chain supporting last-mile delivery (e-commerce) as also to diversity in India to have an increased presence in non-auto segment.
Mr.Dinesh said that the acquisition was a part of company’s business strategy to shift its focus on Indian and Asian markets as it had built capabilities in Europe and the U.S. in the past.
Tata Opportunities Fund will be the third private equity firm after Goldman Sachs and KKR to invest in TVS Logistics. |
The combined turnover will be Rs. 4,000 crore, warehouse space 10 m sq. ft. and employee strength 15,000. |
With a strong global footprint and a range of capabilities, TVS Logistics is on a stronger wicket to offer solutions across segments. |