Global Business Reset Complete, Margin Expansion Next
TVS Supply Chain Solutions has successfully completed a major overhaul of its international operations and is now setting its sights on significantly improving its profitability margins. The company, which faced investor disappointment following its weak performance after its 2023 IPO, expects to achieve a profit before tax margin of 4% by fiscal year 2027 through strategic cost-saving measures and business restructuring.
Project One: The Transformation Initiative
Under the comprehensive Project One initiative, the Chennai-based logistics specialist has consolidated its operations in high-cost markets including Europe and the United States while shifting back-end operations to India. This strategic move is projected to generate annual savings of approximately ₹120 crore, providing a substantial boost to the company's bottom line.
Managing Director Ravi Viswanathan revealed in an exclusive interview with Mint that the company's margin stood below 1% during the first half of FY26, making the targeted 4% PBT margin by FY27 a significant improvement. The transformation comes at a crucial time for the company, whose shares have declined over 40% from their listing price of ₹197.05 in August 2023.
Expanding High-Margin Business Segments
TVS Supply Chain is aggressively expanding its high-margin integrated supply chain services (ISCS) business in key international markets. The ISCS division, which manages end-to-end client logistics including procurement, warehousing, and distribution, delivered an impressive EBITDA margin of 8.5% during the six months ending September.
This performance substantially outperforms the company's global forwarding services (GFS) segment, which managed only a 2.1% EBITDA margin during the same period. The stark contrast between these business segments highlights the strategic importance of the company's shift toward integrated services.
The company is strengthening its business development teams with new hires to support this expansion, particularly focusing on the US and European markets where integrated services command premium margins.
Innovative Business Models and Growth Levers
In an innovative move beyond traditional logistics, TVS Supply Chain is experimenting with basic component assembly for two industrial clients in the United States. The company already handles procurement and warehousing for these clients and is now adding value through assembly operations before shipping completed aggregates.
Viswanathan emphasized that margins from this assembly business are substantially richer than those from pure logistics services. If successfully scaled, this could become a significant growth driver not only in international markets but potentially in India as well.
However, the company has clearly stated it will avoid the business-to-consumer (B2C) segment, despite the success this model has brought competitors like Delhivery, which achieved a market capitalization exceeding ₹32,500 crore through e-commerce shipping.
Analyst Perspective and Market Challenges
While the company's transformation strategy appears promising, analysts maintain a cautious outlook. Ashika Institutional Equity Research analysts noted on November 14 that while TVS Supply Chain shows steady progress toward its FY27 profitability goals, several operational and macroeconomic challenges remain.
The analysts highlighted concerns about the company's thin margins, which could be vulnerable to global trade volatilities, tariff changes, and geopolitical conflicts. Despite maintaining a buy rating on the stock, they reduced their price target from ₹175 to ₹150, reflecting the ongoing uncertainties.
The company's financial performance underscores the need for this transformation. TVS SCS reported revenue of ₹9,996 crore with a loss of ₹10 crore, while competitor Delhivery posted ₹8,932 crore in revenue with a profit of ₹162 crore in FY25.
Since its listing, TVS Supply Chain has demonstrated low single-digit EBITDA growth rates while maintaining PBT margins firmly below half a percent. The company reported aggregate losses in both FY24 and FY25, contributing to investor concerns that the current restructuring aims to address.
With a current market capitalization of approximately ₹5,150 crore and shares closing at ₹116.8 on Wednesday, the success of Project One and the company's margin expansion strategy will be critical for restoring investor confidence and driving future growth.
