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The key challenge for 78-year-old Suresh Krishna, who has taken over as the chairman of the TVS Group's holding company, TV Sundram Iyengar & Sons, is to meet growth targets while improving operations in the 50 companies that make the $6.5-billion group.
The holding company's key business is dealership and it expects to double its annual revenue over the next three years from Rs 6,000 crore. Other group companies are looking at 10-20 per cent annual growth over the next couple of years.
A major chunk of the TVS Group's business comes from trading and it is shifting focus to manufacturing. For the first time in its history, the group has appointed a person with a manufacturing background as the chairman of the holding company.
In his first interview after taking over as the chairman, Krishna told the Business Standard his focus would be on manufacturing, distribution and logistics. People close to the group said convincing family members to consolidate and expand, and taking more companies public were Krishna's main challenges.
"I think it will happen slowly, but eventually people will expand globally as and when there is a customer pull," said Krishna. "We are expanding in China, because the automotive sector in China is asking us to. We have been supplying quite a bit to customers in the US. So, there is synergy in doing it," he added.
Sundram Fasteners, an automobile component company headed by Krishna, was the first Indian engineering company to set up a facility in China. It also became a supplier to General Motors.
Similarly, TVS Logistics, again headed by Krishna and managed by R Dinesh, a member of the promoter family, expanded significantly globally. Goldman Sachs invested Rs 100 crore in 2008 and it and KKR invested Rs 242 crore in 2012.
People close to Krishna said he always had a passion for building an Indian multinational. "You change with time. We have done well. We have tremendous respect from the market and that is something we value," Krishna said.
Krishna said more investment would come into India because Indian companies had barely scratched the surface of the automotive sector. Given the cost structure in other countries, India was a good choice to not only produce automobiles but also export, he added.
India's auto component exports have been growing exponentially and will continue to climb because if the international automotive business wants to be competitive, it will have to find sources that are also competitive. "That is going to be one of the things we want to do," Krishna said.
Besides expanding in global markets, the group will also look at acquisitions. Sundram Fasteners has a factory in China, England, and Germany. Brakes India has one in Oman. "It is only a beginning. If the demand picks up, there will also be a need for very successful logistics to develop. TVS Logistics is one of the companies where we feel that foreign acquisitions have done extraordinarily well in terms of reaching the product to the customer and taking care of customer needs in terms of transport and warehousing," Krishna said.
"I think everything is going to be very concentrated from the group point of view on not only exports, catering to the growing domestic market, looking at acquisitions outside India and then improving logistics," he added.
Though perceived to be conservative and slow in implementation, the listed entities of the TVS Group were star performers over the last year, said an analyst at a domestic brokerage. Investors in Sundaram Clayton, TVS Srichakra and TVS Motors have seen their wealth grow five to seven times over the past two years.
It is one of the few groups that has enriched shareholders over the last three years. While there might not be much upside in the short term, shareholders with a long-term view could look at these stocks, said G Chokkalingam, the founder and managing director, Equinomics Research & Advisory.
Investors, however, would like to see better valuations for firms with cross-holdings. "Earlier, there was a justification for cross-holdings to avoid becoming takeover targets, and group support on branding, marketing and funding helped. Now that each of the group companies has become large, there may not be a need for such cross-holdings," an analyst said.
