Chennai-based NBFC major Shriram Finance on Thursday said the exits of Piramal Enterprises and TPG are on the expected lines, and what is important is new investors who have come in are equally noteworthy entities, signalling a strong institutional interest in the company.
Umesh Revankar, executive vice-chairman, Shriram Finance, told FE in an exclusive interaction that TPG remained invested in the company for quite a long period – for more than seven years. It was expected that they were looking for an exit. The private equity investors normally have their LPs or funds for a limited period. “Normally, it is 5-7 years or 10 years at most, then they have to churn it out and come out with new funds,” he said.
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In the case of Piramal Enterprises, he said that it was also expected since it had earlier announced its intention to exit as it was forming its own financial services entity.
“Piramal Enterprises earlier was a combined entity, and they had demerged into financial services separately, and the other businesses into different divisions. When they demerged, they did say they would like to focus on their financial services business, rather than being an investor in another company’s same business,” Revankar said.
Piramal was the second-largest shareholder in Shriram Finance with a 8.45% stake, after Shriram Capital. Other shareholders are Fidelity group with multiple funds, LIC and GIC, among others. All the existing shareholders have increased their stakes too, he said.
According to him, what is more important is the fact that a lot of global PE investors are keen on India because the economy is doing well. In addition, domestic mutual funds (MFs) are eager to invest in NBFCs too.
“While investing for a longer period, normally they will look for companies that are most promising in the current environment. Shriram Finance, post merger, has become just that and there is a good demand. The very fact that the block deal has happened with a very negligible discount to the market itself indicates that there is a very good demand for the stock,” he said.
Revankar said, “We have quality investors coming in and most of them are long-only funds. None of them are short-period hedge funds.”
Shriram Finance hit the headlines recently with two big investors exiting the company. While TPG divested its entire stake in Shriram Finance, Piramal Entereprises sold its entire stake for about Rs 4,823 crore. There was a strong institutional interest as multiple domestic and international funds picked up stake in the company, according to data.
Some of the major names that lapped up shares in Shriram Finance are ABSL Mutual Fund, Avendus, Bajaj Allianz Life, Fidelity, Blackrock, Goldman Sachs, HSBC Fund, Invesco, JP Morgan, Kotak Mutual Fund, Mirae Asset Mutual Fund, Morgan Stanley, among others.
TPG India Investments sold about 9.92 million shares or a 2.64% stake in the company. The transaction was done at a weighted average price of Rs 1,401 per share and the PE firm bagged Rs 1,389 crore. Among the buyers were Morgan Stanley, Bajaj Allianz Life Insurance, ABSL MF, DSP MF, among others.