TVS Group breaks tradition by letting in private equity investment
CHENNAI: Breaking from the tradition, the $5 billion TVS Group has, for the first time, let a private equity investor Goldman Sachs invest nearly Rs. 100 crore and pick up an undisclosed minority stake in the Rs. 338-crore turnover TVS Logistics Services Ltd., setting the stage for an eventual IPO (initial public offer).
TVS Logistics is hoping to use the money, reach and contact of Goldman Sachs to further speed up its growth. The company has set itself a turnover target of Rs. 1,000 crore to be hit by 2010.
Addressing a press conference here on Friday, Suresh Krishna, Chairman, TVS Logistics, said the private equity (PE) option was forced by “market reality”. Answering a volley of questions, he said the PE money did not come through stake sale. It came via issue of additional shares at a premium, he added. The equity capital of the company stood at Rs. 12 crore prior to the induction of the PE fund. “We will go in for an IPO at an appropriate time. We will wait for the right time,” he added. R. Dinesh, Operating Director, however, said it (IPO) would not be in the next 18 months.
Asked about the equity stake of Goldman Sachs, Mr. Krishna said it could be anywhere between 10 per cent and 30 per cent. Since the opportunities for all TVS Group companies to expand and acquire were high in the current scenario, it was not fair to ask them to fund the needs of TVS Logistics, he said justifying the induction of PE fund.
In his opening remarks, Mr. Krishna said the TVS pioneered the concept of logistics and was the first one in India to go global. Terming logistics as the ‘sunrise’ industry, he said it had a fabulous future. Mr. Krishna said TVS Logistics had adopted a unique non-asset-based model. “We own very little. We do only facilitation,” he added. The asset management was done through the joint ventures, he said.
Significantly enough, TVS Logistics also announced that it had taken a 50 per cent stake in Mumbai-based Greenarches Ltd., which had since been renamed as TVS Infrastructure Ltd.
In yet another important development, TVS Logistics and Dynamic Freight Forwarding Service had come together to form TVS Dynamic Global Freight Services Ltd with 75 per cent holding by the former. The joint venture would focus on auto and non-auto segments.Mr. Krishna informed presspersons that TVS Logistics was also planning to enter finished goods transportation through formation of joint ventures with operators and also via mergers and acquisitions.
Ram Santhanam, Director of TVS Logistics, said India was beginning to have a major say in the global automotive market what with car players such as Hyundai and Maruti Suzuki drawing up major export plans. Pointing out that the tractor units too were making inroads in the global arena, Mr. Santhanam said the components units were a star performer. Mr. Dinesh said that TVS Logistics would grow with the existing players and hoped that “joint venture is the route to grow.” The press conference also saw the presence of Gopal Srinivasan, another Director and a member of the TVS family.