IDFC, which was set up in 1997 to meet the funding requirement for the infrastructure sector, and the Chennai-based Shriram Group, a provider of financial services like loans to small and medium entrepreneurs, are considering options to merge their businesses to create a larger entity worth around $10 billion, a business news channel reported on Thursday. According to the news report, the entire lending business of the Shriram Group, which includes two listed companies Shriram Transport Finance and Shriram City Union Finance, will be merged with IDFC Bank, in which IDFC holds a 52.86% stake. The unlisted life and general insurance business of the group would be merged with IDFC. An announcement is likely to be made on July 8. IDFC and Shriram are said to have exclusivity of 90-120 days for merger talks. The IDFC Bank scrip closed 1.69% higher at Rs 63.35 after touching an intra-day high of 3.85%, while Shriram Transport shares ended up 1.21% at Rs 1,107.90, after rising as much as 3.8% during the session. Shares of Shriram City Union closed 1.01% lower at Rs 2,519.95 after rising 4.02% during the day.
Shriram Transport Finance, the country’s largest financier of commercial vehicles like trucks and also construction equipment, and Shriram City Union Finance, a leader in retail finance across a wide range of products such as home, auto and personal loans have been promoted by Shriram Capital, the overarching holding company for the financial services and insurance businesses of the Shriram Group.
Piramal Enterprises owns a 20% stake in Shriram Capital and a 10% stake each in Shriram Transport and Shriram City Union. Ajay Piramal, chairman of the Piramal group became chief of Shriram Capital in 2015.
IDFC Bank, which started operations as a bank in October 2015, stands to gain from the merger as it would get easy access to a diverse and ready-made customer base, especially in the four southern states where the Shriram Group is a market leader. The bank has said acquisitions have been a part of its strategy to increase its customer base. In 2016, IDFC Bank acquired Grama Vidiyal Micro Finance, which gave it access to 1.2 million rural and semi-urban households in TN, Kerala, Karnataka, Puducherry, Maharashtra, Gujarat and MP.
IDFC Bank said, “We keep evaluating opportunities from time to time and should anything concrete fructify, we will inform the exchanges as appropriate. At this point, there is nothing that can be disclosed.”
“Under the circumstances, we are unable to confirm or deny the news reports. Meanwhile, we cannot comment on market speculations,” the bank added.
Shriram Transport and Shriram City Union also said they continuously evaluate various opportunities to enhance their shareholders’ value, adding that at this point there is nothing that requires disclosures and that it does not comment on market speculation.