Sunday, 16 December, 2018

IDFC twins sizzle on merger buzz

Ajay Piramal chairman of Shriram Capital Ajay Piramal chairman of Shriram Capital
Melinda Barton | 09 July, 2017, 19:41

Financial majors Shriram Group and IDFC have announced a possible merger to create a "financial conglomerate", a top company official said here on Saturday."Today the boards of Shriram Group and IDFC entered into an exclusivity arrangement for 90 days to jointly explore the possibility of a merger", Ajay Piramal, Chairman of Shriram and Piramal group, said in a press meet.The merger is subject to approval from market regulator Securities and Exchange Board of India, Reserve Bank of India, Competition Commission of India and Insurance Regulatory and Development Authority of India, he said. "We will be able to combine the core strength of IDFC, which is wholesale lending with Shriram's understanding and management of deep retail and with insurance and asset management added to this, you can serve the whole gamut of financial services products", Lall added.

Mutual Funds have collectively invested a little over Rs 2700 crore in group companies with the largest holding being in IDFC Ltd. "We have only entered into an exclusivity arrangement for 90 days to jointly explore an opportunity for a merger", said Piramal.

"Shriram group which was founded in 1974 by Ramamurthy Thyagarajan, A.V.S. Raja and T. Jayaraman, and is co -owned by a employee trust will continue as a separate brand post merger".

Reports said both Shriram Capital, the holding company of the group, and the BSE-listed IDFC will be joint holders of the merged entity.

He said it would take at least a year to close the transaction after approvals are received.

A senior IDFC insider said: "You have to evaluate each merger individually". Shriram City Union Finance which has a 23,000 crore loan book is proposed to be merged with the bank.

IDFC Bank, which started its banking operations in October 2015, is the seventh-largest private lender in terms of balance sheet. Mint had reported on Thursday on the merger plans of the two groups, citing people directly of aware of the discussions.

In 2014, the Piramal Group picked up a 20 per cent stake in Shriram Capital and the proposed deal with IDFC could end up as a complex three-way merger if it happens.

Also, since most of IDFC Bank's lent to corporates and infrastructure projects, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.

When Piramal was specifically asked about his role in the to-be-formed new merged IDFC-Shriram entity, he merely said: "As an investor, we will benefit as any other investor would". Both the Mumbai-headquartered IDFC Bank Ltd. and the Chennai-based Shriram Group have already established a huge network pan-India.

"It is no backdoor entry into banking".