TV Sundram Iyengar & Sons Ltd is one of India’s largest players in the independent automobile aftermarket business. Its arm, the over ₹7,000-crore TVS Supply Chain Solutions Ltd (TVSSCSL), has emerged as India’s largest and fully-integrated supply chain management player and among the top 25 players globally. Another arm, the over ₹1,000-crore TVS Automobile Solutions Ltd (TVSASL), is a leader in the automotive aftermarket segment. Joint Managing Director of TVS & Sons, R Dinesh, who spearheaded the growth of the logistics and aftermarket businesses, spoke to BusinessLine on the economic recovery, disruption caused by Covid-9 and growth plans. Excerpts:
How do you view the economic revival? What is your outlook for the next two quarters?
Pent-up demand kicked up the Q2 upswing and my view is that lack of spending options for consumers during the last five months means that there will be stronger-than-normal spend going forward also. Also, if you look at the base, H2 of last year in particular, it was a quite a low period. I expect the consumption level in the March quarter to be higher than last year level. I am not negative here, but cautiously optimistic. So, I am of the view that we will have a positive growth during this H2 vis-a-vis H2 of last fiscal, but the growth rate may vary from segment to segment. Of course, some sectors like SMEs are still under stress, and the pain may be there for them for at least another six months.
How about utilisation levels over these months and cargo availability?
We would have reached between 65-70 per cent now. The surprising factor is that for the first time we saw almost all segments showing positive growth. The long-haul cargo segment was not affected even during Covid-19 because some commodity or other essential items had to be shipped. There was also locked-up fleet capacity due to the pandemic, and hence, movement was always there for the available trucks. But earnings were muted and the moratorium provided some respite. Now more or less, it is returning to normal in some segments. I don’t think the M&HCV will see a big growth. But their survival is not a question now. Also, turnaround time has been improving quarter-on-quarter. The last mile segment, driven by e-commerce sector, had a huge upswing in the past few months.
Did the disruption caused by the pandemic result in any structural changes?
Yes, there was a structural change related to digitisation. People used to tell me that a mechanic, parts dealer or a distributor was not tech-savvy. To our surprise, not only do garage mechanics or parts suppliers now transact on mobile phones, but also about 80 per cent of our parts orders are coming through the digital mode. Also, earlier we struggled a lot to convert our customers to adopt technology to replace paper documents. Today, the same set of customers want to do everything on a digital mode. This is a big disruption that has happened in the lockdown period. Companies like us have been trying to implement global practices and make people adopt technology. Now, we are actually enjoying this shift to digital and I would call this a structural change and the digital adoption has also helped cut down wastages across the supply chain.
Did you witness any other shift in customer business model?
We also saw another structural change linked to cost vs optimisation. Earlier, based on their costs, companies used to outsource work to multiple service providers to cut costs in each area. Post-Covid-19, people say there is no way to survive except to look at everything as an integrated supply chain. In some way, GST spurred the shift towards integrated logistics player. Now, post-lockdown, people are looking for an integrated player. I see this structural change not just in auto, but almost all segments. People are looking for one player to take care of the entire warehousing, transportation, inventory management, delivery to B2B retailer, etc. A single service provider handling end-to-end supply chain was a dream for integrated players like TVS SCS, as we have provided huge cost savings (of about 10-15 per cent in overall supply chain costs) in markets such as the UK. Now in India too, the mindset is changing towards deploying one service provider.
The recent decade saw a significant scale-up in operations of TVS SCS through the inorganic mode. Will this strategy continue?
After early 2018 we have not made any acquisition. Actually, we have been consolidating the operations. Since we made a lot of acquisitions in Asia in recent years, we were focusing on integration aspects. Now we are very much focussed on winning new customers organically and growing with our capabilities. But that doesn’t mean that we won’t do acquisitions. Last mile capability is one area we may look at as we don’t have it now. We always made acquisitions for required capabilities and customers. We are also building multi-geography capabilities or multi-geography working model with the same customers now.
Are you raising any capital to support the growth of TVS Automobile Solutions?
Our first focus here is to make sure that the digital initiatives which we have started on the mobility front bear fruit. We don’t have any immediate plans to raise money. I think, we will make sure that our business model works well (we believe we are doing well in this business). The difference here is we work with the smallest retailers, garages, and transport owners, and relationships are completely digitally-enabled. As we roll that out more and more, we may look at some fund-raising options as needed.
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