TVS Logistics may go public next year

TVS Logistics Services Ltd (TVSL), a subsidiary of Chennai-based TV Sundaram Iyengar and Sons Ltd, is planning to go public by 2016. The firm has met about five-to-six investment bankers and started talks over a possible initial public offering (IPO), according to two persons familiar with the plans. TVS Logistics provides supply chain management, inbound and outbound logistics and warehousing services.

The management has talked to a few Indian as well as foreign investment banks as part of going public, said the first person.

“At a valuation of Rs.3,500 crore, the IPO size could be anywhere between Rs.800-1,000 crore,” said the second person. They both requested anonymity.

Marquee investors KKR and Co. LP and The Goldman Sachs Group who have invested in TVS Logistics may partially exit their holdings through the issue, said both people quoted above.

“We have not decided on the IPO and have not evaluated the company. We will let you know as and when we are ready for the IPO,” a spokesperson of TVS Logistics said. A KKR spokesperson declined to comment, while a mail sent to Goldman Sachs did not elicit a response.

Early this month, TVS Logistics Services Ltd bought a majority stake in Melbourne-based logistics firm Transtar for Rs.200 crore to boost its presence in the Asia-Pacific and in the freight forwarding service market. The acquisition of Transtar, present across 10 of the top 12 container ports of the world, marked TVS Logistics’ entry into Australia.

In May, to get a foothold in warehousing, the Chennai-based logistics firm acquired Tata group firm Drive India Enterprise Solutions Ltd (DIESL), in an all-cash deal for an undisclosed amount. As part of the deal, Tata Capital’s flagship private equity fund Tata Opportunities Fund invested Rs.250 crore in TVS Logistics.

“The exit route for private equity investors will be when TVSL goes for an IPO to the secondary market but I cannot comment when it will happen,” said R. Dinesh, managing director of TVSL, during the announcement of DIESL buyout.

The third-party logistics service provider was launched as a division of TV Sundaram Iyengar and Sons two decades ago. In December 2004, it was established as a subsidiary firm. In 2008, Goldman Sachs picked up a minority stake for Rs.100 crore. Since then, the firm has grown by acquisitions—its first major acquisition was UK-based Multipart Holdings (now called TVS Supply Chain Solutions) for an undisclosed amount. Four years later, global investment firms KKR and Goldman Sachs invested Rs.242 crore for an undisclosed stake.

Several logistics firms, including PE-backed firms, are gearing up for IPOs, which will help existing investors exit. “Compared with the past, when the logistics industry was fragmented, the last couple of years have witnessed the emergence of prominent players, causing increased interest from investors to back these companies,” said Jaideep Ghosh, partner and national head (transport and logistics), KPMG Advisory Services Pvt. Ltd.

Also, volume growth due to growth in e-commerce and more clarity in the Goods and Services Tax (GST) Bill have made the sector attractive, he added.

PE firm Blackstone-backed Gateway Rail Freight Ltd, Future Group’s Future Supply Chain Solutions Ltd and Dubai-based port operations and logistics firm DP World have all initiated talks for IPOs, Mint reported in June. Together, they intend to raise at least Rs.3,000 crore from the markets, it added.

Logistic firms which have floated IPOs recently have seen good response. In April, PE firm New Silk Route-backed VRL Logistics Ltd saw its Rs.460 crore IPO being oversubscribed 74 times. Snowman Logistics Ltd, the cold chain unit of Gateway Distriparks Ltd, also saw its IPO oversubscribed by 59 times last year. Since listing, both stocks have given strong returns, with VRL Logistics shares rising 100%, compared with the issue price of Rs.205 and Snowman Logistics’ shares gaining 96% from the issue price of Rs.47.