What you must know about TVS Supply Chain Solutions IPO?

TVS Supply Chain Solutions (TVS SCS), is part of TVS Mobility Group (part of the reputed TVS group of South India). TVS SCS is among the largest and fastest growing integrated supply chain solutions provider in India. Over the years, the company has brought in its in-depth understanding of multi-sector dynamics and local markets, operational experience, corporate governance standards, and the implicit trust of stakeholders. Incidentally, it was TVS Supply Chain Solutions Ltd that pioneered the development of outsourced logistics industry in India. They have managed complex value chains across sectors for 15 years. TVS Supply Chain Solutions Ltd has over 100 years of experience addressing supply chain challenges for global businesses; apart from government departments, and MSMEs through a fully integrated offerings.

Even within the gamut of supply chain solutions, TVC SCS provides Integrated Supply Chain Solutions, Global Forwarding and Last Mile Solutions that are customized to our customers’ needs. As of date, TVS Supply Chain Solutions employs over 18,000 logistics professionals, has more than 100 owned operating locations and services over 55 global Fortune 500 customers. Some of the sectors to which they provide logistics solutions include Automotive, beverages, FMCG, defence, ecommerce healthcare, railways, telecom, utilities, technology, ITES, and financial services. Some of its blue chip customers include Babcock, Denso, Coca Cola, Daimler Trucks, Diageo, Ford, GM, Isuzu, Hagemeyer, Ministry of Defence, Siemens, and Volkswagen. The issue will be lead managed by JM Financial, Axis Capital, JP Morgan, BNP Paribas, Equirus Capital and Nuvama Wealth. Link Intime India Private Ltd will be the registrar to the issue.

Highlights of TVS Supply Chain Solutions IPO issue

Here are some of the key highlights to the public issue of TVS Supply Chain Solutions Ltd.

• TVS Supply Chain Solutions Ltd has a face value of ₹1 per share while the price band for the book building IPO has been set in the band of ₹187 to ₹197. The final price will be discovered within this band.
   
• The IPO of TVS Supply Chain Solutions will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 3,04,56,853 shares (3.05 crore shares approximately), which at the upper price band of ₹197 per share will translate into fresh issue size of ₹600 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 1,42,13,198 shares (1.42 crore shares approximately), which at the upper price band of ₹197 per share will translate into an offer for sale (OFS) size of ₹280 crore.
   
• Therefore, the overall IPO portion will comprise of the issue of 4,46,70,051 shares (4.47 crore shares approximately), which at the upper price band of ₹197 per share will translate into a total IPO issue size of ₹880 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. There will 6 holders offering shares under the OFS portion, including Tata Capital. The proceeds of the fresh issue portion will be used to repay / prepay outstanding loans availed by TVS Supply Chain Solutions Ltd and its subsidiaries.

Promoter holdings and investor allocation quota

The company was promoted by TVS Mobility Private Ltd, TS Rajam Rubbers Private Ltd and Dhinrama Mobility Solutions Private Ltd. Currently the promoters hold 46.65% of the company, which will get diluted post the IPO. As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while only 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of TVS Supply Chain Solutions Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the IPO of TVS Supply Chain Solutions Ltd

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of TVS Supply Chain Solutions, the minimum lot size is 76 shares with upper band indicative value of ₹14,972. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of TVS Supply Chain Solutions Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for TVS Supply Chain Solutions Ltd IPO and how to apply?

The issue opens for subscription on 10th August 2023 and closes for subscription on 14th August 2023 (both days inclusive). The basis of allotment will be finalized on 18th August 2023 and the refunds will be initiated on 21st August 2023. In addition, the demat credits are expected to happen on 22nd August 2023 and the stock will list on 23rd August 2023 on the NSE and the BSE. TVS Supply Chain Solutions Ltd offers a very unique combination. It has an established and tested business model; it is into an industry that is considered the future of business management and it comes from the group that has a pedigree of nearly a century and is one of the most respected groups. Let us now turn to the more practical issue of how to apply for the IPO of TVS Supply Chain Solutions Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to Rs2 lakh per application) or in the HNI / NII quota (above Rs2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of TVS Supply Chain Solutions Ltd

The table below captures the key financials of TVS Supply Chain Solutions Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of TVS Supply Chain Solutions Ltd which can be enumerated as under

1. In the last 2 years, the revenues growth has been robust showing the potential that the logistics management sector has. Purely on the strength of the prospects of the sector and the pedigree of the group, the pricing does look like it has left something on the table for investors, since profit track is only available for the latest year.
    
2. The latest year profit margins and the return on assets are not really comparable since the3 company was making losses in the previous two years. However, this is a business where a lot of costs get front-ended but once these costs are defrayed, the profits can multiply in a geometric manner. That is the big bet int this case.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio. It has consistently averaged above 1.5X, which is a very good sign for a capital intensive business like logistics management.

While pricing of the IPO does matter here, what is more critical is the eventual PAT margins that will sustain. For now, the signals are good. In the past, the group has shown very good traction in terms of execution of large projects and that will work in their favour. A lot will depend on how the company is able to scale with the use of digital technologies. Purely from the perspective of the model and the track record, it is an issue worth investing from a long term perspective. It is a bet on the India story!