TVS Supply Chain Logistics to retire long-term debt, but not go debt-free: Management

TVS Supply Chain Logistics plans to keep its operating capital in debt for the foreseeable future. The firm plans to use the IPO proceeds to discharge long-term debt, creating significant opportunity for expansion in the next chapter of its journey, as stated by Ravi Viswanathan, Managing Director, and R Dinesh, Executive Vice Chairman, in a pre-IPO interview with Moneypoise.

The newly issued shares will generate Rs 600 crore, which will be utilised to reduce the company's debt of Rs 1,700 crore. The total size of the IPO issue is Rs 880 crore, however this is made up of two parts: a fresh issuance of Rs 600 crore and an Offer For Sale of about Rs 280 crore.

The company's leverage, as measured by Net Debt to Ebitda, has increased from 2.92 times in FY22 to 3.05 times at present.

TVS Supply Chain Logistics has no plans to increase debt via inorganic means as the company has already developed the necessary competencies in-house.

Other financials were discussed, with an emphasis placed on the EBITDA growth from about Rs 243 to Rs 700 crore between FY20 and FY23. However, they also found that inventory levels had risen significantly, from roughly 5.5 to around 7.1. In addition, they noted the dramatic decline in net working capital, which was only 18 days.

The management team has decided to base their capital strategy on the cumulative effects of things like increased revenue, EBITDA, expansion, better inventory terms, and tighter control over net working capital.

The company has little physical assets and uses its money mostly for warehouse outfitting, warehouse leasing, and truck leasing to meet its transportation needs.

In order to build a strong pan-Asian global forwarding network, TVS Supply Chain Logistics has historically engaged in client acquisition, purchasing companies in 2008, 2012, and most recently in 2018-19.The company's leadership has stressed that its capabilities set is practically complete, and the past three years have been devoted to organic growth in line with the 2020 plan for FY27.

In the past, the firm has actively sought acquisitions to bolster its skills in key areas such aftermarket service, production chain service, and the development of a pan-Asian global forwarding network.

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