This also marks the foray of the two into the Indian market.
The joint venture follows a memorandum of understanding signed by both partners earlier this year.
TVS SCS and ALA Group witnessed a strong engagement and active interest from multiple industry participants across the aerospace and defence ecosystem. This momentum accelerated the decision to formalise the partnership through a dedicated joint venture platform, the company said.
TVS SCS will hold a 51 per cent stake in the venture. ALA will own the remaining 49 per cent. The joint venture is expected to emerge as a significant growth driver for TVS SCS in India, with cumulative revenues projected to exceed Rs 2,000 crore by 2031.
R Dinesh, Executive Chairman, TVS Supply Chain Solutions, said that the venture would have initial investment of two million euros. The partners would chip in in proportion to their shareholding.
In a stock exchange filing, TVS SCS said that the joint venture would be under TVS Packaging Solutions Private Ltd., a wholly-owned arm of the company, which was incorporated on 28 April 2017 and engaged in providing packaging solutions.
TVS Supply Chain Solutions would infuse Rs 10.19 crore into TVS Packaging and ALA Rs. 9.80 crore.
Post the infusion, TVS SCS will hold 51 per cent in TVS Packaging and ALA 49 per cent.
The indicative time period for completion of funding is by 30 September, the company said.
The JV would initially focus on opportunities in India. However, TVS SCS and ALA would continue to evaluate opportunities to support aerospace and defence supply-chain requirements across select international markets over time, the company said.
Aerospace and defence supply-chain solutions globally are characterised by specialised procurement, inventory management and mission-critical fulfilment capabilities, making them structurally higher margin businesses with strong returns on capital employed (RoCE). “Quality companies in this sector have consistently delivered strong profitability metrics, with profit before tax margins in the range of 8-9 per cent, reflective of this high-value segment,” the company noted.
The ALA Group supports a wide range of aerospace and defence platforms across air, land and naval domains, providing certified spare parts distribution, inventory optimisation, kitting, direct line feed, consignment stock, and defence-grade logistics engineering services. It is the only company in the aerospace & defence sector to track and certify products with legally binding value using patented IAC (Instant Automatic Certification) technology worldwide.
“There is significant compliance and certification requirements and entry barriers are high,” Dinesh said.
The various players in the defence and aerospace segment include Airbus, Boeing, Dassault Aviation, Safran Group, Rolls-Royce, Collins Aerospace and Thales Group, among others. “Many of these global aerospace and defence companies are also expanding their partnerships and joint ventures with Indian companies as part of their long-term localisation and manufacturing strategies in India,” TVS SCS said.
“India is emerging as one of the most important growth engines for the global aerospace and defence industry, driven by localisation initiatives, strategic investments and expanding international collaborations between India and key global aerospace and defence ecosystems,” Dinesh said.
“India is one of the world’s fastest-growing aerospace and defence markets, driven by increasing defence modernisation programmes and expanding global partnerships. We have strong customer relationships across the aerospace sector and many global companies in this sector are actively evaluating and expanding their presence in India, creating significant opportunities for specialised supply chain services,” Vittorio Genna, Vice- President and Co-Founder, ALA Group, said.
“In TVS SCS, we have found a partner with deep market understanding, a strong domestic network, proven execution capabilities and a trusted brand. Their strong operational and technology-led execution capabilities, combined with extensive supply chain infrastructure, make them an ideal partner to build a scalable and differentiated aerospace and defence logistics platform”, he said.
“Given the specialised and high-value nature of this business, we expect the venture to become profitable within its first twelve months of operations and be a meaningful contributor to our growth and profitability in India,” Vikas Chadha, Global Chief Executive Officer, TVS Supply Chain Solutions, said.
TVS SCS brings deep supply chain experience from its long-standing defence and utility sector operations in the Europe and accounts for over 30 per cent of the company’s Europe business.