After delivering on his mandate to generate manifold returns for his investors, R Dinesh, the managing director of TVS Logistics Services, sounds sanguine.
On Thursday, Canadian pension fund CDPQ bought a 37 per cent stake in the company for Rs 1,000 crore from existing investors Goldman Sachs and KKR.
The management and TVS family members, which led the transformation of a sleepy Rs 12 crore company to one with Rs 5,000 crore annual turnover, picked a 5 per cent stake, bringing in skin in the game.
For 51-year-old Dinesh, who belongs to an elusive and close-knit South Indian family, the idea of roping in an external partner was challenging in 2004 when he set out to overhaul the company that was spun off from being a business unit of the TVS Group. But getting the financial partner changed the game for the company.
“It was a huge growth story post the private equity investor came in,” Dinesh said in an interaction with ET. In 2008, Goldman Sachs acquired a 21 per cent stake for Rs 100 crore.
Today, the company that is being valued at around Rs 2,800-3,000 crore has given Goldman more than fivefold returns on its investments, after growing consistently at an average 35 per cent annually.
“In 1996, when we started this business, nobody understood logistics in India. We decided that if we wanted to scale up the business and become an end-to-end logistics service provider, then we need to tread the path of bringing in an investor,” Dinesh said.
“The rate of growth at 30-40 per cent could not be funded from internal resources. We wanted to test the waters with a PE investment. We wanted to be globally competitive and back then Goldman Sachs gave us the exposure of the global market.” CK Ranganathan, the chairman of CavinKare who is a friend of Dinesh, considers him a dynamic personality.
“Dinesh is someone who puts values ahead of money and that is something that impresses me the most. The passion with which he works is seen in the way he pursued knowledge and traveled widely and zeroed in on acquisition targets,” Ranganathan said.
“The global vision with which he has transformed the business and especially after coming from the conservative TVS family is commendable.” Dinesh, a chartered accountant who also studied cost management accounting, has steered the company away from being solely dependent on activities related to the automobiles sector, the main business area of the TVS Group.
Dinesh expects revenue to grow threefold in the next three to five years — “We see the business be Rs 15,000 crore one” — powered by its global focus.
The company has been on an acquisition spree, taking over at least 14 companies globally in the past five years. In 2011, it inducted PE fund KKR that brought in around Rs 250 crore and is expected to make around 2x returns on its investment.
Over the years, TVS Logistics has substantially widened its service capabilities, including last-mile delivery, demand forecasting and technology logistics through its acquisitions in the UK, such as of Rico Logistics and Multipart.
It added capabilities like subassembly and sequencing through its Wainwright buyout in the US. There were apprehensions around the breakneck speed at which Dinesh and his team were acquiring companies. However, integration was never a problem despite TVS Logistics being culturally different from the companies it acquired.
“Apart from being a humble learner, this is something I credit myself with. We have been able to seamlessly integrate and work with people across geographies and have never faced any issues,” comes an unusual reply from a man who is known to be shy and humble.
He drives a Honda City, a midsize car, and is a vegetarian who loves Italian food. “In the 2006-07 boom, the real Dinesh began to emerge. Someone who had a big vision, an ability to partner and co-work and bond effectively with the most diverse of people as well as myriad JV partners; attracting both entrepreneurs he partnered with as well as venture capitalists,” said Gopal Srinivasan, managing director of TVS Capital.
Srinivasan credits Dinesh with making a small domestic player a multi-country operation, scaling the business 20-fold, attracting the best of investors and starting to dare to reinvent automotive parts distribution (audacious and risky, as incumbents will opine).
His ability to imagine scale and see opportunity, to work well with people and partners, learn rapidly and yet retain the core tenets of the group’s values are seen as the key drivers of his success.
Having tested waters with two PE funds, it was therefore unlikely that Dinesh would make a quick choice in identifying the next partner.
In a process that ran for more than a year, investment bank JM Financial tapped almost all deep-pocketed buyout funds who were willing to partner with TVS Logistics. But Dinesh was clear that he needed a financial sponsor that had time on its hand and the capacity to fund in future too.
“CDPQ is a longterm partner and not someone who wanted to exit in three-four years as short-term investors. While CDPQ may not get involved in day to day functions of the company, they are a perfect partner in this phase of our growth,” says Dinesh.
After opening its India office in March 2016, Anita M George, the managing director for South Asia at CDPQ, has hit the ground running. Although TVS is CDPQ’s third investment in India, for George, the chase to partner with TVS Logistics started 12 years ago when she was with her previous employer, IFC.
“Now, at CDPQ, I have got the opportunity to be part of this journey,” George told ET.
By the time CDPQ decided to step in, TVS Logistics was a multinational with proven track records, but Dinesh wanted to make sure that the investor understands the nuances of the business.
“The logistics business has some of the best kept secrets,” said Dinesh. “We wanted to be sure that the marriage is perfect, our partner understood and wanted to live with us.” CDPQ has in principle agreed to invest further in future.
That should help TVS Logistics in its quest to expand. “The company which is close to a $1 billion (in revenue) aims to be a $3 billion business in the next three-five years. If we do larger acquisitions we will grow faster,” said Dinesh.
“India and Asia will be key focus markets for acquisition, particularly in the customer access areas.”
Dinesh is abroad at least half the days every month, as he travels to various markets and identifies acquisition targets personally.
For someone who is deeply spiritual, close family friends such as TVS Capital’s Gopal Srinivasan and TVS Logistics Chairman Suresh Krishna continue to be the anchors in life.
“They are the one who taught me to look for other sources of capital to grow business and be hungry for growth in first place.”
Image Source Indiatimes.com