TVS Group gets its first equity partner; lifts Rs100 crore funds from Goldman Sachs

The closely-held $5 billion TVS Group has, for the first time in its history, invited private equity investment in one of its companies. On Friday, TVS Logistics Services Ltd (TVSL) announced that it has raised Rs100 crore through private equity investment firm Goldman Sachs to fuel its growth, setting the stage for a public offer anytime after 18 months.

Addressing the media, Suresh Krishna, chairman of TVSL, and also that of group company Sundaram Fasteners, said Goldman Sachs has invested a significant minority stake which, according to him, may vary between 10 and 30 per cent. This fresh infusion without any dilution f stake is expected to help the company reach its projected turnover of Rs1,000 crore in 2010 from Rs338 crore in 2007-2008. The company has declared its intention to become a global logistics provider in three years and hopes to grow 35 per cent to 40 per cent every year.

Defending the decision to go hunting for funds to a private equity firm, Krishna said that current liquidity requirements of other group companies made internal raising of capital difficult. However, he insisted, that did not change the core values of the company. "We are a conservative group. The mark of a good company is to continue to do well in downturn, as we feel that this separates the men from the boys. After all, this conservatism pays in downturn," he said.

He said that the Goldman Sachs  money did not come through stake sale but via issue of additional shares at a premium. The equity capital of the company stood at Rs12 crore prior to the induction of the private equity fund. ''We will go in for an IPO at an appropriate time. We will wait for the right time,'' he added. R Dinesh, operating director, however, said it  would not be in the next 18 months. Dinesh also spoke on the possible benefits of leveraging Goldman Sachs' contacts to accelerate growth.

In his opening remarks, the chairman said TVS had pioneered the concept of logistics and was the first one in India to go global. Terming logistics as the ''sunrise' industry'', he said it had a fabulous future. He also praised TVSL's unique non-asset-based model. ''We own very little. We do only facilitation,'' he added. The asset management was done through the joint ventures, he said, adding that TVSL is ''not just a transportation company, instead it is a solutions company''.

The chairman also spoke of TVSL's recent ventures. These included a 50 per cent stake in the Mumbai-based Greenarches Ltd., which the company has renamed as TVS Infrastructure Ltd. This company would create logistics parks by investing about Rs500 core through a special purpose vehicle. It owns about 20 acres in Pune and 10 acres in Chennai and plans to build up a land bank of about 200 acres in automotive hubs such as Gurgaon, Halol, Hosur, Indore, Lucknow, Singur and Uttaranchal, he added.

Another recent TVSL development was the formation of a joint venture with Dynamic Freight Forwarding Service called TVS Dynamic Global Freight Services Ltd., in which the former holds a 75 per cent stake. This company would focus on auto and non-auto segments, with annual turnover expected to reach Rs250 crore in three years, said Krishna.

As for future plans, he said TVSL would enter finished goods transportation by establishing joint ventures with operators and through mergers and acquisitions. He also spoke of aggressive expansion plans in China, Indonesia and Thailand.