TVS Supply

TVS Supply Chain Solutions reported a consolidated revenue of ₹2,512.9 crores for Q2 FY25, marking an 11% year-on-year growth, while remaining flat quarter-on-quarter. For the first half of FY25, consolidated revenue grew by 11% YoY to ₹5,552.3 crores. The company achieved a Profit Before Tax (PBT) of ₹17.9 crores in Q2 FY25 and ₹31.6 crores for H1 FY25, indicating a progressive turnaround from a loss in the corresponding previous year. PBT margins improved by 100 basis points YoY.

The Integrated Supply Chain Solutions (ISCS) segment continued its strong performance, growing 6.2% YoY in Q2 and 7.2% in H1, with EBITDA margins reaching almost 11%. The Network Solutions (NS) segment showed impressive growth, increasing 17.2% YoY and 4.6% QoQ in Q2, and 16% in H1. This growth was primarily driven by healthy volume in the forwarding business and higher ocean freight rates, despite the NS segment's margin dipping to 2.3% in Q2.

Business development remained a key growth driver, contributing ₹280 crores in Q2 FY25 and ₹526 crores in H1 FY25. A significant multi-year transformational contract with a large industrial customer in North America, valued at over ₹2,200 crores, was secured, with an expected annual billing of over USD 30 million from Q2 FY26. The company's pipeline of new opportunities remains strong, presenting an annualized revenue opportunity in excess of ₹4,500 crores.

The Integrated Final Mile (IFM) segment, a part of Network Solutions, is undergoing a turnaround, with management expecting it to achieve run-rate profitability by the end of H2 FY25 (Q4 FY25). The company aims to improve the overall NS segment margin from 2.3% in Q2 to an exit rate of 4.5% by Q4 FY25, with a long-term goal of reaching a sustainable 7% margin in the later part of next calendar year. This will be supported by cost reduction measures and pricing initiatives.

The company acknowledged ongoing macroeconomic challenges, including the Red Sea situation, which led to carrier diversions, longer voyages, and increased fuel consumption, adding ₹80 crores of revenue with no margin. A three-day dock workers' strike in US ports also impacted operations. Despite these headwinds, management expressed confidence in their ability to sustain growth momentum and profitable growth in the coming quarters.

TVS SCS has a vision to achieve a 4% PBT margin (equivalent to USD 100 million) on a USD 2.5 billion revenue base in the next three years. They aim for a sequential profit run rate improvement of 50 to 100 basis points every four quarters. Regarding debt, gross debt is projected to be around ₹900-950 crores by FY25 end, with interest costs expected to remain stable at approximately ₹18 crores for the next couple of quarters.

The company's strategic focus includes profitable revenue growth, with a belief in adding ₹1,000-1,200 crores of revenue in a profitable manner. TVS SCS is also actively deploying AI, with pilot projects for new business bids and polarized light damage detection for beverage clients. They are also implementing an auction price and target bidding module for Courier Alliance in the UK, emphasizing state-of-the-art IT-enabled solutions.