The Hindu Business Line : TVS group hives off logistics division into separate co

(From left) Mr S. Viji, Joint Managing Director, Brakes India Ltd; Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners Ltd; Mr R. Dinesh, Executive Director, T.V. Sundram Iyengar and Sons Ltd; and Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor Co Ltd, at a press conference in Chennai on Monday to announce the formation of a new company, TVS Logistics Services Ltd. — Bijoy Ghosh

Chennai , Nov. 29

T.V. Sundram Iyengar and Sons Ltd, the parent company of the TVS group, has hived off its logistics division into a separate, wholly owned subsidiary company.

The new company, TVS Logistics Services Ltd, hopes to get into agreements with companies abroad to get a global presence.

It will establish joint venture companies in Spain, Thailand, Germany, the UK, the US and China.

The new company is expected to end 2004-05 with a turnover of about Rs 100 crore, which it feels will grow to Rs 500 crore by 2007.

Turnover from overseas operations is expected to reach Rs 100 crore next year.

The initial investment in the company will be Rs 25 crore and it will have a paid-up capital of Rs 12 crore.

It will concentrate only on the automotive sector, where the group has gained experience over the years, in distribution and retailing of automobiles and spare parts.

The decision to form a separate company has been prompted by the increase in the division's turnover, which has been doubling year on year for the last two or three years, and also because the TVS group feels that with outsourcing of components increasing from India, providing logistics services requires specialised skills that the division has acquired.

Announcing the starting of the new company, senior members of the TVS group companies - Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners Ltd; Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor Co Ltd; Mr S. Viji, Joint Managing Director, Brakes India Ltd; and Mr R. Dinesh, Executive Director, T.V. Sundram Iyengar and Sons - said providing logistics services was a knowledge-based industry and required skills to combine various elements such as warehousing, delivery and materials planning.

According to them, TVS Logistics has tied up with a company in Spain and will set up a company in partnership with a local company in Thailand.

This company is expected to begin operations by March 2005.

It is holding talks with a company in the US and with freight forwarder in China.

It will form a company in Germany by April 2005 and is examining acquisitions and alliances in Europe.

Its strategy for Europe will be to not only provide logistics solutions but also a complete business process outsourcing solution, including sourcing related work such as identification and audit of suppliers and quality documents, planning and delivery follow up, technical and commercial support and product development.

According to a press release, TVS Logistics has been able to reduce the total supply chain cost ranging from 5 per cent to 25 per cent for its clients in India and abroad.

Currently, 40 per cent of TVS Logistics' turnover comes from TVS group companies and the balance from outside. Over time, the new company expects business from non-TVS group companies to grow as much as 80 per cent of turnover, according to Mr Dinesh.

Its list of clients includes Ashok Leyland, Ford India (through a separate joint venture), General Motors, JCB, Mahindra & Mahindra, Royal Enfield, Tata Motors, TVS Motor Company, Pricol, Cummins and Rane group.

Mr Dinesh said TVS Logistics would hold a majority stake in all the joint ventures it forms.

The company has 17 warehouses and 14 hubs in India and six warehouses in Europe.

TVS and Sons has two companies abroad - one in the UK (TVS Automotive Europe) and the other in Sri Lanka (TVS Lanka) for carrying on the dealership and distribution business.

TVS Automotive Europe's client base includes leading tier-1 and tier-2 component suppliers and this company will act as the parent for setting up logistics joint ventures in Europe.

According to Mr Venu Srinivasan, in a vehicle 75 per cent of the parts are sourced from outside, because of which logistics is key to a manufacturing company.

Typically, logistics cost of automobile companies is 2 per cent of sales and there is a possibility of getting savings of 20 per cent on that.

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TVS group hives off logistics division into separate co