TVS Supply Chain Solutions Limited (TVSSCS) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, we welcome you all to the Q3 FY26 Earnings Conference Call of TVL Supply Chain Solutions Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company and may involve risk and uncertainties that are difficult to predict. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded. Now, I hand over the conference to Mr. Prabhu Hariharan, Head Investor Relations from TVS Supply Chain Solutions Limited. Thank you, and over to you, sir.

Thank you, moderator. Good morning, and welcome all to TVA Supply Chain Solutions, earnings call for Q3 FY26. I hope everyone had a chance to look at the financial results, which were posted on the company's website, and also on the stock exchange. We have with us today, Mr. Ravi Vishwanathan, our Managing Director, and Mr. R. Medhinathan, our Global CFO. We commence the call now with opening remarks from our management, along with a business performance update. It will be followed by an open forum for Q1D. Before we begin, a customary remark, I would like to point out that some of the statements made during this call may be forward-looking in nature and must be reviewed in conjunction with the risks that the company faces. A disclaimer to this effect has been included in the investor presentation. Now, I request and hand it over to Ravi to make the opening remarks. Over to you, Ravi.

Thank you, Prabhu. Good morning to all of you. First, let me welcome all of you once again to a earnings call to discuss the performance for the third quarter ended December 31st, 2025. I will share with you the highlights of our performance and my colleague YG, our global CFO, will take you to the analysis of our numbers. We look forward to interacting with you as part of the Q&A session. For those who might be joining the call for the first time, please note that TVS Supply Chain Solutions is a tech-led and asset-led supply chain solutions provider. We have two main business segments, namely the Integrated Supply Chain Solutions, or ISCS, and the Global Forwarding Solutions, or GFS. We operate across four continents, Asia, Europe, North America, and Oceania. Where we offer bespoke and tailor-made solutions in the 3PL space and also offer 4PL services in select markets. For the company, you may please refer to our website at www.tbsscs.com. Let me start with the key highlight for Q3. Q3 was a strong quarter for us. 11.1% year on year and adjusted EBITDA saw a step change as it grew by 31.2%. The adjusted EBITDA margins on year on year basis expanded by 110 basis points to 7.3% and by 60 basis points sequentially. These 25 crores in Q3 FY26, with margins improving from negative 0.6% to positive plus 0.9%. From a segment perspective, the quarter was led by strong growth in India, supported by new business wins and improved profitability. This points to a healthy demand environment and strong execution on the ground in both segments, ISCS and GFS in India. Our India geography grew by 11.8% on a year-on-year basis and by 5.5% sequentially. In ISCS Europe, we saw a clear profitability inflection. We delivered a strong margin expansion supported by disciplined cost actions and better business mix.

Thank you. Moving on to the GFS segment, our revenue for Q3FI26 is 736.3 crores, compared to 669.6 crores in Q3FI26 and 617.2 crores in Q3FI25, marking a 10% sequential growth and 19.3% year-on-year growth, largely led by growth in ocean-fright volumes in India. Right rates continue to be under pressure, as Ravi mentioned earlier. GSH India revenue grew from Q3FI25 of 147.9 crores and Q2 of 201.1 crores to 219.5 crores in Q3FI26, with 48.2% growth on year-on-year basis and 8.8% on quarter-on-counter basis, largely led by the volume growth in India. With respect to the nine-month FI26, our consolidated revenues stood at 7,970.7 crores, with INR 7,496.6 crores in the previous year, at a growth rate of 6.3%. The growth was driven by our ISCS segment with revenues of 5,955.4 crores, reflecting a 6.9% improvement compared to this 5,571.5 crores in the previous year. The GFS segment reported a revenue of 2014. 1.3 crores grew by 4.7% from 1,925.4 crores in the previous year, largely led by volumes in India. However, rates continue to remain under stress, and the macroeconomic uncertainties, and the tariff for electric continue to impact this segment. On the strategic cost-takeout initiatives, the Project 1 in the UK and Europe is tracking Hasker plan. As previously communicated, we expect an annualized savings of around 110 to 120 crores. And in-year savings of about 50 to 60 crores from this program. These benefits are already visible in the overall ISGS margin improvement in Q3 and year-to-date. We continue to drive the operating leverage through structural cost-takeout initiatives across the geographies, including through right-sizing and right-shoring. Now moving to the cost structure, our movement in freight, clearing, forwarding and handling expenses on a quarterly basis and nine-month basis in line with the revenue growth in the GFR segment. Offset by decline in ISCS segment due to the change in the distance mix. Material related cost increased from 391.4 crores in Q3FI25 and 444.63 crores in Q3FI26 to 475 crores in Q3FI26 on a year-on-year and sequential basis. On a YTD basis, material cost increased from 1,003 14.5 crores to 1,408.7 crores. Other expense increased from INR 251.6 crores in Q3 FI 25 to 269.8 crores in Q3 FI 26, and on a sequential basis, it declined from 298.1 crores to 269.8 crores. On a YTD basis, it increased from 679.6 crores to 824 crores. The movement in the material cost and other expenses are in line with the change of business mix in the ISCS segment. Subcontract expenses increased from 356.2 crores in Q3 FI 25 and from 369.4 crores in Q3 FI 26 to 389.5 crores in Q3 FI 26. This is in line with the revenue growth from new customers and change in their business mix. Employee cost marginally increased from 590.3 crores in Q3 FI 25 to 598.6 crores in Q3 FI 26. Mainly due to the cost inflation and in line with the revenue growth partially offset by the cost takeout initiatives. On a sequential basis, it declined from 644.4 crores in Q2 FI26 to 598.6 crores in Q3 FI26, mainly due to an exit of large projects in Europe, as earlier communicated, and also the benefits of cost takeout initiatives and savings from others in Project 1. On YTD basis, the employee costs rose from 1743.3 crores in previous year to 1861.9 crores in YTD-FI26. This increase was primarily driven by the impact of annual inflation, also in line with the growth in the revenue. Depreciation of right-of-use assets and interest on lease liabilities under INDAS 116 increased year-on-year, with depreciation increasing from 99.4 crores to 105.9 crores. In terms of profitability, our adjusted EBITDA grew by 31.2% year-on-year, with margins expanding by 110 basis points to 7.3%. This growth was driven by a combination of strong performance by India and Europe and the benefits of the cost-take-off programs, including the project one. Sequentially, as well, adjusted EBITDA growth 11.7% and margin expanded by 60 basis points, demonstrating the consistency of the underlying earnings trajectory. Within the sequence, ISCS delivered strong performance in Q3-FI26. With adjusted EBITDA of 182.9 crores at 9.2% RG, from 148 to 2 crores at 8.1% in Q3-FI25, and 173.8 crores at 8.7% in Q3-FI25. A significant margin improvement in ISCS is mainly on account of recovery of the ISCS euro businesses, with ISCS India continuing to deliver consistent growth in capital. GFS delivered sequentially improved performance in Q3FI26, adjusted EBITDA of 17.3 crores at 2.3% margin, up from 14.6 crores at 2.2% margin in Q3FI26, and 11.5 crores at 1.9% in Q3FI25. This segment continues to face macroeconomic headways. On a sequential basis, both the businesses showed improvement. IACS had continued growth and GFS improving on the back of volume growth in India. At the bottom line, we delivered adjusted PBT of 24 crores compared to a loss of 16 crores in Q3 last year. Our PBT margin expanded significantly from negative 0.7% to positive 0.9%. On a nine-month basis, the adjusted PBT has increased more than four times. This is an important indicator of the continuous uptick in R&Us. A reported PBT for the quarter stands at 16 crores after exceptional cost of 9.1 crores relating to this in terms of the new labor codes. To summarize, in Q3, we delivered double-digit top-line growth, strong adjusted EBITDA margin expansion, and continued uptick in the profitability. With regard to a recent announcement of entering into definitive agreement for the acquisition of Swami Infants, I would like to point out that the acquisition is fully funded through internal accruals and is expected to be EBITDA, PBT, and ROC accredited. This was Tentan Arthasins, the attractive FNCG and consumption-led supply chain space in India. With this, I will hand it back to Ravi.

Thank you, Vaidi, for the detailed analysis. Let me now take a few minutes to walk you through the business update and key customer wins and the demand outlook across our markets. We continue to build solid traction in new business development during the quarter. In Q3, we have generated revenue of over 319 crores from new business wins, representing 13% of our Q3 FY25 revenue. And for the first nine months of the year, our revenue from new business wins stands at Rs. 683 crores, which represents 9.1% of our nine-month FY25 revenue. With a healthy and diversified funnel across India, Europe, and North America.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sukrit Patil from iSight FinTrad. Please go ahead.

On to the team. I have two questions. My first question to Mr. Ravi is, as TVS supply chain builds on this

profitability turnaround,

what may be the key priorities guiding your growth strategy over the next few quarters? How do you see the balance between strengthening India operations and scaling global businesses evolving? Thank you.

Yeah, thank you, Sukhret. We have said that in the past, that for us, all the geographies, all the regions provide us with the opportunity to grow. India specifically, given its strong economic climate, presents a wonderful opportunity, and this quarter has been a quarter where we have been able to capitalize on a lot of these opportunities and converted those into meaningful revenues and margins. We continue to stay very focused on our India. On this trajectory of growth, last quarter, if you remember, I had mentioned that we will get to about 4% sequential growth, and we did that in the IACA segment itself, and overall 5.5% in the India market. And we are confident that this trajectory will continue, given the strength of the business wins that we have. On what we remain focused, of course, the focus is saying which to... of discipline that we have shown over the last few quarters, and that's really what has been the key. What is also exciting for us is the...

Thank you very much. My second question is to Mr. Vaidyanathan, along a similar line, what financial signals will shape the company's approach to cost discipline, cash flow management, and capital allocation? How do you see these signals influencing long-term investment choices and margin protection? Just want to understand your plan of action and your point of view on this.

Thank you. No, as we previously communicated, our capital allocation decisions are primarily towards our ISCS business, which is in a strong growth trajectory. You know, I think one of the key things for us is to know the revival of the Europe business from where it was stated. Four or five quarters back, the actions that we have taken there. And also the investment we are making in the India business. As Ravi mentioned, the MND that we are doing, the amount of capital that we are allocating for the India business. All this is some of the things which we have taken in the last few quarters, and we will continue to see that in the next few quarters as well, as we strengthen the ISCS segment.

Thank you, and best wishes. Thank you.

Thank you. A reminder to all participants, anyone who wishes to ask a question, may press star and one on their touchtone telephone. The next question is from the line of Somil Shah from Paras Investments. Please go ahead.

Hi, good morning. I'm called to the team for good numbers. Sir, I wanted to know, I mean, since there are a lot of trade deals happening with EU and now again with US, so what's your views on this? How this is going to benefit our company? And are we seeing some benefits already coming through in this quarter?

That's a very relevant question, which is occupying our time and mind space too. But we'll wait. We are some time away before we get into the implementation stages of many of these FTAs. But it provides us an exciting opportunity. Specifically, we have said in the past, over the last three, four quarters, there has been a big, I would say, Thank you.

GFS, but even on the ISCS side, I mean, once the trade deal happens, we should see some benefits, because there would be, I mean, a lot of shift from Europe to India and a lot of transfer of services. So, are we going to benefit in that also?

No, there will definitely be an upside. Like I said, when the ISCS segment, typically, Samuel, as we have said before, the pipeline takes anywhere between 6 to 18 months to conclude based on the kind of solution that we provide. GFS is far more transient. So, we could submit a proposal today and close the deal three weeks from now. So, the immediate impact can be seen in the GFS side, but you are absolutely right. There will be an uptick in the ISCS business too. Overall, it augurs very well for the supply chain business. Okay, okay.

And if you see our first nine months, I mean, we have done a growth of 6% of IOI. So going forward for next quarter also, how shall we look at our growth? Because I think we are excited for a double digit growth. So to grow at double digit, I think the Q4 has to be a bumper one. So just wanted to agree on that.

We continue to push very hard for double-digit growth. To my entire leadership team, we push the messaging that we need to be focused on the double-digit. However, given the product mix that we have, which has got a fair amount of GFS, we have to wait for the GFS business also to start firing before we can say that we are firing in all cylinders. We've come down in the last nine months, and...

Last quarter was around 644 crore and currently it is 598. So, I mean, are we reducing our employees? What is the reason for such a drop in employee costs?

So, as I explained, there was one large project in Europe where the customer had desired to insource it, which we had exited in Q2. That is where you will see a reduction in the employee cost. Plus, also the other, you know, the project one savings and other things will be reflected in the reduction in the employee cost.

Okay, that's it from my side. Thank you, and all the best. Sure.

Thank you. Thank you. The next question is from the line of Disha Giria from Ashika Group. Please go ahead.

Good morning. My first question is regarding the GFS business. Can you help with a volume uptake or a volume growth number for the GFS business for this particular quarter on your basis?

We don't give a water wise volume, but I can tell you in terms of percentage, you know, how we have grown, in terms of ocean stride, right, compared to the last Q3, we have grown by about 29.6%. And in terms of air stride, I think we have grown by about 18.7%.

On a consolidated basis, can you just help me with this name?

Yeah, consolidated basis is correct. Significant uptick level use.

All right. My second question is regarding our FY27 performance. The last year guided to be able to reach a 4% PBT margin. So, are we still on track for the same? Are we, and if you could guide some like a revenue growth number as well?

Nisha, we continue to. Remain focused on the 4%. It's an aspirational number that we will keep pushing at. Like I said to the previous question from, I think, Samuel, on the GFS business. Thank you. We'll hopefully get a better view of things as we exit Q4.

The question is regarding the recent acquisition of Swami and Sons. So, just wanted to understand what was our position in the Indian FMCG supply chain network before this acquisition, and what was the need for this acquisition, and what incremental margin or incremental revenue growth are you seeing from this acquisition in the next financial year?

Okay. From a strategic perspective, excuse me. FMCG was important because India is a very strong consumption-led economy. We had a strong play in the FMCG segment, but FMCG is an area where... That's the reason why we looked at... I mean, sometimes.

Thank you. That took some light.

A reminder to all participants, anyone who wishes to ask a question, may press star and one on their touchtone telephone. The next question is from the line of Vikram Suryavanshi from Phillip Capital. Please go ahead.

Hi, good morning, sir. In terms of, if you look at profitability impact, we have good amount of new business wins, and also we have some customers' turn. So, is there any impact on margin also that new businesses are at better margin and customers' turn mixes also impacting the profitability going forward, or that was not much in terms of margin and so on?

Sir, Nikhil, could you please repeat the question, Mikram?

Uh, I hope I'm audible now.

Yeah, a little bit, if you could repeat the question.

Yeah, sure. Uh, yeah. So I was just trying to understand the impact on margin because of the new business as well as the customer charge. Have we seen that new businesses are at better margin compared to what customer charge we had seen in the quarter?

No, I would say that from a margin point of view, no, we will not dilute the margin. No, I think the hazard of the focus is on taking out the cost and keeping the margin profile hazardous, right? So all the new business means we will continue to hold on to our margins that we are currently generating. The customer churn that you see here, I was explaining to the previous participants, where the customer had to insource their activity, and that is the customer churn that you see there. But from a margin point of view, the new business continues to come at a healthy margin, and we will continue to maintain that.

Okay. But just as a curiosity, customer insourcing probably, I think our whole model is that really giving customers to better service at a better price. So, what was the particular case where customers find value in insourcing? Let me just highlight as a curiosity.

Sure, sure. It's a good question. It's a relevant question. This particular customer in Europe decided to insource because of what I would call challenges internally.

And within ISCS, if you can do comment on how was the performance of integrated final mile in terms of trajectory?

I'll have to answer the question, but again, as you know, we have combined IFM as one entity, so we report ISCS as one entity, but...

And just one more point on Project 1, I guess we were targeting almost like close to 120 basis point improvement from the Project 1 in terms of profitability side. So how much of that is materialized so far, the efforts that we have put, and how much further scope is there, and by when we can almost see that full benefit?

Yeah. In the current year, we expect about 50 to 60 crore savings coming out of it. How does the project one benefit? And as we said, on a full year basis, annualized basis, next year we'll see about 110-120 crores of savings. So all these things are permanent savings.

I think that was helpful, sir. Thank you very much.

Thanks, Vikram.

Thank you. The next question is from the line of Bharat Seat from Quest Investments. Please go ahead.

Hello. Am I audible?

Yes, sir. Yes, sir.

You're audible.

Yeah, sir, I have a question. One is this, when we are talking about personalizing some of the business, I mean, low margin or low-smacking kind of a business, In the... Pruning of such a journey, where are we still, how much do you think we will have to prune out so to consistently improve the profitability part one? And second, I mean, sorry, I missed your answer on this. What are the levers that we have further, I mean, to what project one you said and how is that project one is only thing or beyond that also we are looking for improvement on sustainable basis over next two, three years. How do we...

Okay, Bharat, I probably will answer the first question, which is on the projects, you know, that we exited. I think we have done this project exit in the India region in the last 18 months or last couple of years, and the focus has been on, you know, trying to reprice the low margin or the loss making and exit some of the projects. I think that is what we have done. I would say that broadly, I would say the correction has been done. And going forward, we will not see any big exit, and the focus will be on growth going forward, right? In terms of the second question with respect to the project, when I know I was... We have seen about 50-60 crores of savings in the current year. We will see about 50-60 crores of savings in the current financial year, and the annual savings will be about 110-120 crores. So this is one of the key issues for us as we move into F527 from a profitability point of view. And plus also the ISCS, which is in a very strong growth trajectory, especially India, Europe, and the North America business, where we are expecting a good revenue growth. So all these things are some of the levers for us in the ISCS business. GFS, as Ravi mentioned, it is still going through some kind of macroeconomic. We will have to wait for the overall industry to, you know, revive and turn around. Hopefully, you know, as Ravi mentioned, we expect something to happen in FI27.

Okay. Thank you and all the best, sir.

A reminder to all participants, anyone who wishes to ask a question, may press star and run on their touchtone telephone. The next question is from the line of Rajit Agarwal from Nilgiri Investment Manager. Please go ahead.

Good morning, gentlemen. Just a few data points to begin with, if you can share those. Can you share the number of customers as on date, as on end of 31st December? Number of employees, warehouse space in million square feet, if you can...

I think the warehouse space is part of the investor deck, Rajiv, if you can refer it, I think you will be able to figure it. We will have given it for each geography, we will be able to look at...

I think it's as of end of FY25, the data which is given in the day...

Yeah, you can publish that on an annual basis, Rajiv, actually.

Okay, okay, fair enough. And the others, employees, number of customers, that also will be on annual basis?

All these data points are published on an annual basis, Rajesh. So if you could wait for one more quarter, we'll be able to publish that.

All right. Can you share the gross debt as in date?

I mean, as of 30th September, we had about 8000, including lease liabilities.

Again, that's not the lease liabilities.

I'm only talking about the bank debt borrowings. That will be about 850 at the end of September.

Okay. You did share the order book, but would it be possible to share, you know, in terms of number of customers, what's the outlook? For whether you maintain a pipeline, or for Q4, if you can share a quantitative number, I mean, just want to understand, see, the reason I'm asking is, after all, the logistics business is more a business of volume, and there's only as much we can do on pricing and margin improvement. So, if there is anything you can share in terms of number of cuts, I mean, subjective, qualitative, or quantitative.

So, that's just... I'll see you next time.

No, I actually wanted a bit more on the outlook in terms of onboarding of new customers, but I guess I'll wait for the data points at the year end. The deck mentions the industrial, the breakup of our customers into various industries, and it says consumer 13%. So, that is inclusive of SMCG, right? Or is it pure SMCG?

It's predominantly what I would call SMCG. With the acquisition of Swami and Sons, it will give us an entry into the FMCG space.

Alright, so that would include e-commerce as well?

We don't do B2C business, so I want to qualify that, but yes, it will include e-commerce, where we work with e-commerce companies on their fulfillment side.

Alright, wonderful. Yeah, OK, uh. Just one last question. Any outlook on any large organic capex or inorganic spend going forward? If you have any concrete plans?

Well, the capex, I think we are broadly, we spend about 1.1% of our revenue. I think we continue to do that, especially for the new projects, which we continue to have for the previous years. In terms of inorganic, we just announced our swamians. So that will be one key.

Thank you, sir. Thank you very much.

Thank you very much. We will take that as a last question for today. I now hand the conference over to Mr. Ravi Vishwanathan, Managing Director for closing comments. Thank you, sir.

Thank you. It was a very interactive Q&A and hopefully we were able to provide all of you with the answers. Before we wrap up, I just want to reiterate the key takeaways from this quarter. Let me just close by saying that Q3 has been a quarter of solid performance for TBS supply chain solutions with clear progress on growth, profitability, and execution across our portfolio. We delivered double-digit revenue and adjusted EBITDA growth. and also at PBT level, supported by discipline execution and improving business mix. Our focus as a leadership team remains very clear, driving profitable growth, continue the margin expansion through Project 1 and cost initiatives, improving the cash generation, and build sustained revenue visibility through a strong, diversified pipeline. With the momentum we have built so far this year and with discipline execution across regions, I am confident that we are moving steadily towards strengthening our financial profile and delivering on our medium-term objectives. Thank you once again and for your continued trust and support.

On behalf of TVS Supply Chain Solutions, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.