The Rs.3,000-crore TVS Logistics Services Ltd., a part of the $7-billion TVS group, has probably done the highest number of acquisitions among its group companies. It has established in the area of complete logistics management of auto parts exports from India. And, it has also built a strong global image. The man who has been driving the company on a faster growth lane is R. Dinesh, its Managing Director. He spoke to The Hindu about the implication of GST on his company and the industry. Excerpts:
What kind of new capabilities does your latest deal bring in?
This acquisition (Drive India Enterprise Solutions Ltd.) places me in readiness for GST (goods and services tax). With this, I will have a location which I can use for multiple customers. Otherwise, I would have only customer-focused warehouses. Theoretically, a warehouse has to have separate partition for every customer (under the current rules) unless it is a transhipment hub. For example, if am buying and supplying into production, I can’t keep it in the same warehouse. I have to keep it in different warehouses. But with GST, I can keep everything under one roof. Also, when I am focussed only on auto segment, profitability will be always a problem due to cyclicality of the industry.
To remove that risk, we need to have a focus on non-auto segment, which the new company would provide.
In India, to get a profitable growth is not very easy. We acquired companies which were highly capable and profitable. So, will we get enough profitability, which is higher among Indian companies through this deal? Yes, that’s what we hope for.
What will be the benefits of GST for a company like yours?
In the U.K., I take ownership of the goods. Some times, I even buy the goods and ship them directly to the customer without actually having any cost. With GST coming, I can do that in India too. Today, I have to pay four per cent additional extra duty in every state. And, I can’t take ownership of the goods. So, every state I have to have one mother warehouse and many distribution centres. If GST is implemented, I can have one mother warehouse for five states, and have distribution centres in each state. So, the cost of warehousing will come down.
How will the GST roll-out alter the supply chain industry landscape?
It will change in a few ways. It helps to plan your supplies so that movement of goods from one warehouse to another will be easier without more paper works. Streamlining of your warehouse and network can be done at one go. About 90 per cent of the present warehousing requirements are arising because of inefficiency in the absence of GST. Once that comes, one can actually have warehousing planning done. But the requirements may not reduce, but it will get streamlined and will become more efficient. In my view, there will be at least 1-2 per cent savings on the cost of distribution once GST comes in.
Three dilutions to private equity funds… are you diluting TVS brand?
If you look at it philosophically, TVS group firms have already given away ownership of certain percentage of holding. In the same way, we have given some holding to private equity firms. The share market today versus the share market when TVS group firms had to go public… there is a significant time difference. So, today I am able to do a valuation, and raise equity from private equity firms. In our case, we are assessing PEs to fund our faster growth. I don’t think we are diluting the brand, only diluting the percentage of holding.
How prepared is your company to tap the opportunity in the e-commerce space?
We see e-commerce as a very good opportunity for us. The U.K. company (Reco) that we had acquired actually does the last-mile delivery/service. Every product that is sold requires service and parts, and managing that process is the biggest challenge even for an e-commerce player. What we have is the capability to actually do that planning, organisation and supply. This is not available presently for most of these companies. So, we can not only plan the supply of the products which e-commerce companies are looking for, but also offer out-of-the-box solutions that are not copied from the west but in an Indianised format. i.e, we will incorporate some of the best practices from the West into the system. So, we can be an end-to-end supply solution provider for any e-commerce firm.
Presently, e-commerce players are majorly serviced by the courier firms. Do we see 3PL (third party logistics) firms such as TVS Logistics getting into this and create some new business models in supply chain areas?
I think we misuse the word courier. Yes, courier companies may be doing it. But logistics firms are the ones who will be providing trucks or warehouses.
We see them as an extension of 3PL providers rather than calling them as courier firms. I call it last-mile delivery or last-mile capabilities by logistics firms as different from just courier that is just delivery. So, we have now better capabilities to offer the solutions companies may need.
Would you continue to focus on inorganic growth strategy?
We have been quite successful in our acquisitions. Of course, the challenge in any acquisition is to make it a successful one. So, I don’t want to say that we have done all our acquisitions. We see some more gaps to fill. Freight forwarding is one area, where we think we can explore. Also, our presence is not very strong in Asian markets such as China and Thailand.
So, we think there could be potential opportunities in these segments. But, do we need to do it? Not necessarily. Is it good to do it? Yes, because it can give us faster growth.
What are the growth prospects given the slowdown in most of the global markets?
From TVS Logistics’ perspective, we have performed better than the market. The reason is we brought in some unique capabilities to differentiate ourselves from others. We also unlocked growth potential of some of the companies we acquired. All these helped us to sustain our growth. Even though, India may not be growing at double-digit, there is a huge potential in logistics outsourcing, which, we think, we can tap into by applying our global capabilities in the Indian market. Our job now is to convince the customers about our capabilities, and, of course. that may take some time. But we believe we are on the right track.
What kind of push do you see for supply chain industry in view of the Make in India Campaign?
Logistics today is still seen as a contract service provider. We need to be an industry and which means logistics as a stand alone independent player. Of course, implementation of GST will help it to be an independent player. Today, I am providing manpower or trucks or warehouse … and we are not seen as anything above this. But in the global context, logistics is an industry in itself, and governments give specific focus on that. If `Make in India’ got to be successful and grow, it can happen only on the back of a strong supply chain industry. So, logistics will become integral to `Make in India’ push.
With a number of acquisitions, TVS Logistics is now a multi-cultural organisation. How has been your experience in managing multi-cultural teams?
We have been very humble in most of acquisitions. Usually in such acquisitions, people from buyer’s side will go occupy the helm of the acquired firm. We have done the reverse. People from the companies that we acquired have either occupied top posts in our company or trained people from Indian context. Our success in making the multi-cultural thing happen has been integrating the best practices – it could be from the U.S. or the U.K. or India. This is the best practice; let all of them get trained to be able to implement it. Even during the downturn, we grew and we managed to give the benefit of growth to the employees.
How is your company preparing for the new age requirements?
One of the things which we have been working on is ‘young minds’ initiative. We have actually set up a programme for youngsters i.e. for people below 30 or 35 years. We have given them the task of thinking as to how, from a logistics perspective, we can offer some innovative solutions. This is aimed at making our company continue to be relevant for new-age industries — be it e-commerce or any other one. Presently, there are 5 people from India, 2 from the U.S. and 3 from the U.K. They are actually getting together to work every quarter. We have just started the first quarter. We want the team to focus on some disruptive technologies.
(jagannathan.kt@thehindu.co.in; balachandar.g@thehindu.co.in)
