TVS Logistics plans to become a major player in the UK market following the takeover of Multipart. Managing director Ramachandran Dinesh explains the strategy to Malory Davies.
The takeover of Jaguar and Land Rover by Tata in March 2008 highlighted the growing strength of Indian companies in the global economy. Now TVS Logistics is set to become a major player in the UK following the takeover of Multipart.
TVS Logistics is part of the giant TVS group which has sales of more than US$5 billion. It is a relatively new company within the TVS Distribution division having become an independent operation in 2004.
Managing director Ramachandran Dinesh describes the TVS Logistics business model as an asset-light operation handling end-to-end logistics.
“We will work with key customers wherever they require,” he says, pointing out that it already has operations in Thailand, Spain, Germany, the US and UK.
TVS Logistics is a major provider of aftermarket parts support in India. It operates from within the customer’s existing networks and offers scaleable technology to manage distribution resources – people, space, equipment, value-added services – while controlling inventory accuracy and providing order/inventory visibility.
Dinesh says that TVS had identified the automotive aftermarket as a growth area and had been looking for acquisitions. However, the company had been cautious. “It’s easy to buy assets – but it is difficult to get a good customer base,” he says.
This was one of the key attractions of Multipart, he says. And he points out that TVS had spent some time ensuring that it had got the right company. “We started looking at Multipart several years ago when it was owned by the RAC.”
Multipart was established more than 25 years ago as the parts distribution business of Leyland Trucks and has grown into a multi-faceted logistics organisation.
It has sales of £60 million and provides warehousing and distribution as well as a range of in-house support capabilities including tailored IT solutions, electronic parts cataloguing, technical publishing, strategic procurement, inventory management and supplier management to reverse logistics that complete the supply chain cycle.
It is based at Chorley in Lancashire where it has a 270,000 sq ft distribution centre. Three other sites provide an additional 350,000 sq ft – two of which are “behind the wire” on Ministry of Defence sites.
There are five divisions: Multipart Supply Chain Solutions provides end-to-end logistics support to the automotive and industrial sectors; Multipart Direct sells parts for light and heavy commercial vehicles; Multipart Defence provides logistics support for all three arms of the UK forces; Multipart Utilities offers utility companies a service that covers all aspects of meter replacement programmes; and Msys is the systems development wing.
“This is an important strategic move aimed at growing our presence in the UK by acquiring an established company with a reputation for delivering high quality logistics services,” says Dinesh.
“We are also looking at further consolidating our presence in India, the USA and Europe through joint ventures or acquisitions and will enter the South American and Chinese markets in 2010. We will cross a turnover of £143m (Rs 10bn) by 2010 and have set a target to grow this to £357m (Rs 25bn) by 2012.
TVS plans to use Multipart’s IT capabilities to provide enhanced service levels to its customers there and in other world markets. It will also build on the existing Multipart operations in the defence and utilities sectors to expand its presence in these areas. This will support TVS Logistics in its aim of becoming the preferred partner for its customers in India and globally in total supply chain management.
Dinesh sees significant cross-selling opportunities between the two market sectors – the aftermarket and the inbound logistics.
TVS set itself a 100-day plan to look at potential customers: “We want to double the size of the business in three years.
“This acquisition provides the necessary financial strength and access to global customers to enable Multipart to increase its rate of growth, which will be funded by investment in excess of £17.5 million.”
But from a customer perspective perhaps the most significant element TVS brings to the deal is the ability to help customers in Europe source from low-cost suppliers.
“By developing our global spread we will be able both to support Indian-based component suppliers seeking to enter new markets and to assist overseas customers in sourcing from low-cost countries,” says Dinesh.
Ramachandran Dinesh is a fourth generation member of the family that founded TVS (T V Sundram Iyengar & Sons).
The group traces its origins to a rural transport service, founded in 1911 in Tamil Nadu, India. It is still based in Madurai in the south of India. Since then, it has grown into a network of more than 50 companies with a combined turnover of some $5bn, making it India’s leading automotive components supplier.
TVS companies operate in diverse fields that range from two-wheeler and automotive component manufacturing to automotive dealerships, finance and electronics.
The business is divided into four main divisions. Distribution accounts for some $1.2bn, as does manufacturing, while the components business has sales of some $2.6bn. The fourth division covers the financial services operation.
Like all family members in the company, Dinesh has worked his way up through the business starting off as a trainee washing cars and repairing vehicles, learning about the operations from the ground up.
He trained as a chartered accountant and has studied at Harvard. “Fun for me is creating something,” he says.