TVS SCS Charts Course for Profit Growth & Efficiency

Ashwin Thakker

— 2 min read
  • PBT Target: 4% by Q4 FY '27, with a long-term goal of 8%-11%.
  • ISCS Adjusted EBITDA Margin Target: 10%-10.5% in the medium term.
  • ISCS Revenue Growth Outlook: Mid-teens.
  • GFS Normalized EBITDA Margin Target: 3%-3.5%.
  • Project One Cost Savings (UK/Europe): INR110-120 crores annualized, with INR50-60 crores in FY '26.
  • Project One PBT Contribution: Approximately 1.2%.
  • IFM Turnaround PBT Margin Improvement: 0.4%.
  • Operating Leverage PBT Improvement: 1.9%.
  • Overall Revenue Growth Outlook: Mid-teens.
  • Order Pipeline: Strong at INR5,300 crores.
  • AI Deployment: Pilots underway for efficiency and volume handling (Agentic AI).
  • Exceptional Cost (Q1 FY '26): INR91 crores due to Project One restructuring.
  • TVS ILP Share of Profit (Q1 FY '26): INR177 crores (one-off from asset transfer).

TVS Supply Chain Solutions targets a 4% PBT by Q4 FY '27, propelled by strategic transformations and efficiency gains. The company's Q1 FY '26 earnings call highlighted key initiatives, including the integration of UK and Europe businesses, significant cost savings, and a robust pipeline, all aimed at sustainable growth despite market volatility. This sets a clear roadmap for future profitability.

Strategic Restructuring Drives Efficiency

TVS Supply Chain Solutions is integrating its UK/Europe ISCS and IFM businesses via 'Project One' for streamlined operations. This targets INR110-120 crores annualized cost savings, with INR50-60 crores expected in FY '26. A one-time restructuring cost of INR91 crores was recognized in Q1 FY '26. These actions, including the IFM turnaround, are projected to improve PBT margin by 0.4% and contribute 1.2% to overall PBT from Project One. The ISCS segment targets an adjusted EBITDA margin of 10%-10.5% in the medium term, indicating enhanced profitability.

Growth Outlook and Digital Advancement

TVS SCS forecasts mid-teens revenue growth, backed by a strong INR5,300 crores order pipeline, despite subdued Q1 FY '26 new business wins. The GFS segment faces macroeconomic pressures, targeting a normalized EBITDA margin of 3%-3.5%. To enhance efficiency, the company is deploying AI pilots for demand forecasting and automation, with 'Agentic AI' expected to boost operations. This technological focus, combined with operating leverage projected to add 1.9% to PBT, is crucial for achieving the 4% PBT target by Q4 FY '27. Management also eyes a longer-term PBT goal of 8%-11%.

TVS Supply Chain Solutions is positioning itself for sustainable growth through strategic restructuring, cost optimization, and technological adoption. With clear targets for PBT and segment-specific margins, the company demonstrates a confident outlook, leveraging a robust pipeline and ongoing efficiency initiatives to navigate market challenges and deliver long-term shareholder value.

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