Ajay Piramal, chairman, Piramal Group and Shriram Group, on Wednesday subtly indicated that the proposed merger between the Shriram Group and IDFC is being reworked since a section of shareholders were not happy with the structure. The contours of the proposed merger are still being worked upon and have not yet been finalised, Piramal said on Wednesday. “The status of the deal is in works, as we had announced even in August, we are going to explore ways to see if a merger works out on the basis of what the RBI (Reserve Bank of India) approves and on the basis of what the valuations are. So we are still looking at it,” Piramal told reporters on the sidelines of the launch of Piramal Finance’s foray into retail housing finance business through its wholly owned subsidiary Piramal Housing Finance.
On being asked if the structure of the proposed merger would be changed due to opposition from a section of shareholders, Piramal said, “We will see. It is all about opposition of shareholders. We are the largest shareholder. We will never do anything which is not in the interest of shareholders. We have a vested interest to see that. But even otherwise, as a group, Piramal has always seen to it that all shareholders get the most appropriate deals. So that’s what we will see.” Piramal Enterprises, the flagship company of the Piramal Group, owns a 20% stake in Shriram Capital and 10% stake each in Shriram Transport and Shriram City Union. Ajay Piramal became the chairman of Shriram Capital in 2015.
On July 8, the Shriram Group and IDFC had entered into an exclusivity agreement for 90 days to evaluate a potential merger that would help build a mass retail franchise with a universal bank at its core, which would offer customers a range of products. According to details of the merger shared by the two companies in July, Shriram City Union is slated to be merged into IDFC Bank, while Shriram Transport Finance is supposed to remain as a standalone listed subsidiary of IDFC. The life and general insurance businesses of the Shriram Group are supposed to become subsidiaries of IDFC, which would hold a 75% stake in them. Rajiv Lall, MD & CEO of IDFC Bank, had said the bank would have found it difficult to absorb the assets of Shriram Transport, and hence it was decided to keep it as a subsidiary of IDFC.
Sources close to the deal said shareholders of Shriram Transport are unhappy with the current structure of the merger as they fear dilution in value and are pushing for a change in the structure of the deal. “The minority shareholders are bargaining hard to sweeten the deal for themselves,” the source added. Shares of IDFC fell 2.49% on Wednesday to close at Rs 58.65 each, the biggest fall in more than a month. IDFC Bank fell 1.57% to end at 56.30. Shriram City Union’s stock fell by more than 2.95% to close at Rs 2,009. However, the shares of Shriram Transport rose by 4% and ended the session at Rs 1049.20 apiece. Commenting on Piramal Housing Finance, Piramal said the company plans to grow its loan book to Rs 15,000 crore by 2020. He said that in the first three weeks of operation, assets under management stood at Rs 200 crore. Piramal Housing Finance will offer home loans as well as loan against property and construction finance for small developers. It plans to target loans in all categories, including affordable housing. It has opened its first branch in Mumbai and plans to expand operations to Bengaluru, Pune and the NCR region in coming days.