IPO: TVS Supply Chain Solutions

In a nutshell Quality : TVS Supply Chain Solutions' three-year average return on equity (ROE) and return on capital employed (ROCE) are -5.5 and 3.2 per cent, respectively. Growth : Its topline grew 21.5 per cent per annum over FY21-23, driven by high growth in the integrated supply chain solutions segment (ISCS) Valuation : The stock will be priced at a P/E and P/B of 216.5 and 6.5, respectively, as compared to the peer median and average of 48.9 and 8.2 times, respectively Overview : The rise in cross-border trade and increase in discretionary consumption can help the company grow. However, intensive competition and volatility in freight costs remain a threat. About TVS Supply Chain Solutions TVS Supply Chain Solutions (incorporated in 2004) is one of the largest supply chain companies in India in terms of revenue. It offers supply chain management services, including integrated supply chain solutions (45 per cent of revenue) and network solutions (55 per cent). Strengths of TVS Supply Chain Solutions Technology differentiation through constant expenditure on innovation has helped the company adapt to changing customer needs and simplify the whole supply chain process. It has maintained long-standing relationships with its top 10 clients (an average of 10 years as of FY23). Weaknesses of TVS Supply Chain Solutions Exposed to adverse exchange rate fluctuations as 73 per cent of revenue is denominated in foreign currencies. Debt-to-equity stood at 4.6 times at the end of FY23. The company is a serial acquirer, undertaking more than 20 acquisitions in the last 16 years. Consequently, its goodwill as a percentage of net worth stood at 84 per cent (as of FY23). Any major impairment in goodwill could wipe out a large chunk of its net worth. IPO details Total IPO size (₹ cr) 880 Offer for sale (₹ cr) 280 Fresh issue (₹ cr) 600 Price band (₹) 187-197 Subscription dates August 10, 11 and 14, 2023 Purpose of issue Debt repayment Post-IPO M-cap (₹ cr) 8617 Net worth (₹ cr) 1324 Promoter holding (%) 43.4 Price/earnings ratio (P/E) 216.5 Price/book ratio (P/B) 6.5 Financial history Key financials 2Y growth (% pa) FY23 FY22 FY21 Revenue (₹ cr) 21.5 10235 9250 6934 EBIT (₹ cr) 119.7 160