Nippon Express in talks to buy 43% stake in TVS Logistics

Nippon Express in talks to buy 43% stake in TVS Logistics. Deal size expected to be Rs1,670 crore, valuing TVS Logistics at Rs3,800 crore; private equity investors KKR and Goldman Sachs to sell stake. More From Companies » Mumbai: Japanese logistics company Nippon Express Co. Ltd is in talks to buy a stake of about 43% in Ltd from existing private equity (PE) investors KKR and Co. Lp and Goldman Sachs Group Inc., according to two people with knowledge of the development. The deal size is expected to be Rs. 1,670 crore, valuing TVS Logistics at Rs. 3,800 crore, one of the two persons said. Both spoke on condition of anonymity. The transaction will give KKR and Goldman an opportunity to exit in the backdrop of TVS Logistics delaying plans for an initial public offering (IPO) until next year, the second person said. TVS Logistics, a subsidiary of Chennai-based T.V. Sundram Iyengar and Sons Pvt. Ltd, planned to raise Rs. 800-1,000 crore through an IPO in 2016 at a valuation of Rs. 3,500 crore, Mint reported in October. Besides Nippon, a couple of other global PE funds are also interested in TVS Logistics, said the first person, without disclosing names. KKR and Goldman Sachs own a combined 43% stake in TVS Logistics. Tata Opportunities Fund holds about a 7% stake in the logistics company and T.V. Sundram Iyengar and Sons and the promoters the rest. Spokespersons for KKR, Nippon Express, TVS Logistics and Goldman Sachs declined to comment. The $18-billion Nippon Express Group comprises 369 companies with operations in 240 cities in 41 countries. In India, the Japanese freight company has 26 offices in cities including Ahmedabad, Bengaluru, Mumbai, Chennai, Kochi, Delhi, Hyderabad, Indore and Trivandrum. In the year ended 31 March 2015, South Asia and Oceania contributed 3.4% of Nippon Express’s overall revenue. “We are increasing our presence in South Asia. while aggressively developing business in India, the region’s largest economy,” Nippon Express’s president and chief executive officer Kenji Watanabe was quoted as saying in the company’s FY15 annual report. Launched as a division of T.V. Sundram Iyengar and Sons two decades ago, TVS Logistics became a subsidiary of the group in December 2004. In 2008, Goldman Sachs picked up a minority stake in TVS Logistics for Rs. 100 crore. Four years later, KKR and Goldman jointly invested Rs. 242 crore for an undisclosed stake. It is an opportune time to invest in logistics in India given the boom in e-commerce shipments and increased consumption, said analysts. “This, coupled with Make in India and the pick-up in export/import volumes, will result in strong growth in logistics and more investors seeking to access this sector,” said Sawan Kumar, executive director, UBS Investment Bank. With PE funding, TVS Logistics made buyouts of entities such as UK-based Multipart Holdings (now TVS Supply Chain Solutions) in 2009, Melbourne-based logistics firm Transtar in 2015 and Tata group firm Drive India Enterprise Solutions Ltd in May last year. KKR, which has invested about $1.7 billion in India through the PE route, is looking for several exits in 2016. If the transaction materialises, TVS Logistics will be the second company KKR exits this year. In March, KKR sold its 80% stake in the Netherlands-based Alliance Tire Group, promoted by Indian entrepreneur Yogesh Mahansaria, to Yokohama Rubber Co. Ltd, valuing the company at $1.2 billion. KKR has also started talks with Shanghai Fosun Pharmaceutical (Group) Co. Ltd and Baxter International Inc. to sell its significant minority stake in Gland Pharma Ltd. In the recent past, several global PE funds have initiated the process of exiting from logistics firms in their portfolio through IPOs or secondary transactions. Blackstone Group Lp, which has invested in GatewayRail Freight Ltd, has been looking for an exit through a proposed IPO by the logistics firm. In April, New Silk Route Partners made a partial exit from VRL Logistics Ltd through its Rs. 460-crore IPO. Since 2011, about 78 PE and venture capital deals worth $1.2 billion have been closed in the Indian logistics sector. Last year alone saw 27 transactions worth $405 million, the largest size in 5 years, according to data from VCCEdge, which tracks deal activity. US-based PE fund Warburg Pincus invested about $133 million in Ecom Express Pvt. Ltd in 2015. A clutch of investors, including Tiger Global Management Llc, invested $85 million last year in Gurgaon-based e-commerce logistics firm SSN Logistics Pvt. Ltd, which operates under the brand Delhivery.