TV Sundram Iyengar and Sons Ltd, the parent company of $2 billion TVS group announced on Monday the formation of a new company called TVS Logistics Services Ltd.
The logistics arm of the group is in talks with joint ventures to establish its presence in Thailand, Germany, US and China.
Addressing a press conference, Suresh Krishna, CMD, Sundram Fasteners Ltd, said, "The logistics business was started in 1997 as a backward integration of its distribution activity. There are smaller few logistics companies in the TVS group which will now functionally come under TVS Logistics Services Ltd."
The TVS Logistics Services is a wholly owned subsidiary of TVS and Sons Ltd. The logistics subsidiary will specialise only in automotive sector.
Krishna said that the logistics company was in the "threshold of big expansion". India is becoming one of the key outsourcing markets (low cost country) for components and Indian companies are growing globally both through acquisitions and exports.
As these companies are in need of logistics partners who understand their requirement, TVS Logistics has decided to expand its operations globally by leveraging its tier-I and tier-II customer base of TVS Automotive Europe, he added.
TVS Logistics is expected to clock the current financial year with a turnover of Rs 100 crore (Rs 1 billion) and targets Rs 500 crore (Rs 5 billion) by 2007. An investment of Rs 25 crore (Rs 250 million) will be made in the company in the next one year. It has a paid-up capital of Rs 12 crore (Rs 120 million).
TVS and Sons already has established two companies one in the UK called the TVS Automotive Europe and the other in Sri Lanka as TVS Lanka for carrying on distribution and dealership business.
TVS Automotive Europe will act as the parent company for setting up logistics joint venture in Europe. A company has already been established in Spain. Joint venture companies are expected to be formed in Thailand by March 2005 and in Germany by April 2005.
He added that logistics is usually misinterpreted as only transportation of goods, which is "far from truth" as it is just a subject of logistics. Logistics is a knowledge-based industry that requires procurement, transport, inventory control and distribution of goods.
Venu Srinivasan, managing director, TVS Motor Company Ltd said that cost of logistics of a company will be around 2 per cent of its total sales. With effective and efficient logistics 20 per cent of the logistics cost can be saved. TVS Motor saved about Rs 1.5 crore (Rs 15 million) on logistics out of the total logistics cost of Rs 8 crore (Rs 80 million).
The logistics catering only to the automotive sector in India is estimated to between Rs 1,400 crore (Rs 14 billion) to Rs 2,000 crore (Rs 20 billion).
R Dinesh, executive director, TVS and Sons Ltd, said that as large as 60 per cent of the turnover of TVS Logistics will come from outside clients and the remaining 40 per cent is contributed by the TVS group.
Dinesh said that TVS Logistics will hold the majority of stake in its overseas joint ventures. The company has 17 warehouses, 14 hubs of which 6 are in Europe and one in US.
TVS logistics will not only provide logistics solutions but also a complete business process outsourcing solution including sourcing related such as identification and audit suppliers, documents, planning and delivery follow-up, technical and commercial support and product development.