TVS Supply Chain Solutions: Navigating Growth with Strategic Precision in Q2 & H1 FY26

TVS Supply Chain Solutions Limited has delivered a robust performance in Q2 and H1 FY26, marking a significant stride in its financial journey. The company, a tech-led and asset-light supply chain solutions provider, reported its best Profit Before Tax (PBT) since listing, underscoring the effectiveness of its focused execution and disciplined cost management. Consolidated revenue for Q2 FY26 grew 6% year-on-year to INR2,663 crores, with Adjusted EBITDA reaching INR178 crores. The company also achieved a positive Profit After Tax (PAT) of INR16.3 crores for the second consecutive quarter, reflecting sustained momentum in earnings recovery.

The Integrated Supply Chain Solutions (ISCS) segment emerged as the primary growth driver, showcasing stellar performance with sustained revenue growth and margin expansion. Its Adjusted EBITDA margin expanded to 8.7% in Q2 FY26, up from 8.2% in Q2 FY25. This growth was primarily fueled by operational excellence, strategic right-sizing, and right-shoring initiatives. In contrast, the Global Forwarding Solutions (GFS) segment faced headwinds from a challenging macroeconomic environment, resulting in flat revenue at INR670 crores and a decline in margins to 2.2% from 4.2% year-on-year. Despite these challenges, management's calibrated cost and efficiency actions are beginning to yield results, positioning the GFS business for potential margin recovery in the upcoming quarters.

Strategic Initiatives and Market Dynamics

The company's strategic initiatives are clearly yielding results. 'Project One' in the UK and Europe, a significant transformation program, is progressing as planned, delivering operational and commercial synergies. This project is on track to generate annualized savings of INR110-120 crores, with in-year savings of INR50-60 crores, expected to materialize from Q3 FY26. Furthermore, the company has undertaken strategic cost take-out initiatives across all regions, which are crucial for improving GFS profitability and strengthening the overall financial foundation.

Management has also demonstrated agility in optimizing lease commitments, transitioning from long-term leases to more flexible medium and short-term rental arrangements where feasible. This move has already contributed to a decline in Right-of-Use (ROU) asset depreciation and interest costs, reflecting a proactive approach to cost management.

New business development remains a strong focus, with the company securing INR204 crores in new wins during Q2 FY26, representing 8.1% of Q2 FY25 revenue. The active pipeline stands at a robust INR6,200 crores, providing substantial revenue visibility. This growth is driven by the 'ENCIRCLEMENT' strategy, aimed at increasing wallet share with existing customers and expanding the scope of services. Notable contract wins include mandates from a global leader in building technologies, a top Indian commercial vehicle manufacturer, and a large global agricultural equipment company.

Segmental Performance and Outlook

The ISCS segment's strong performance is evident across geographies. While India's ISCS revenue was flat in Q2 FY26 due to the exit of low-margin accounts and delayed project starts, management expects a 4-5% linear quarter-on-quarter growth going forward, supported by a strong pipeline. The North America ISCS business grew by an impressive 20.3% CAGR over the last four years, outperforming US GDP growth, and the company aspires to reach $0.5 billion in revenue organically in this region. Europe's ISCS business also grew by 14.4% CAGR over the last four years, despite a one-off setback in Q3 FY25.

The GFS segment, despite current pressures, is expected to stabilize. Management aims to restore GFS EBITDA margins to 3.5-4% once macroeconomic headwinds subside. The company anticipates an uptick in India's GFS volumes following recent GST changes, which should positively impact performance in the coming quarters.

Confident Outlook and Future Trajectory

TVS Supply Chain Solutions remains confident in its ability to achieve its medium-term goal of 4% PBT by Q4 FY27. The company's focus on execution discipline, cost rigor, and strategic initiatives positions it for continued profitable growth. With a diversified customer base, long-term relationships, and a global footprint, TVS Supply Chain Solutions is well-equipped to leverage market opportunities and build a stronger, performance-driven enterprise. The management's transparent communication and proactive measures instill confidence in its ability to navigate challenges and deliver consistent, high-quality growth.