The Shriram Group and IDFC are likely to complete the due diligence process for their proposed merger in a month's time and submit the report to their respective boards of directors for approval, an official with direct knowledge of the matter said.
The Shriram Group and IDFC are likely to complete the due diligence process for their proposed merger in a month’s time and submit the report to their respective boards of directors for approval, an official with direct knowledge of the matter said. Once the boards of directors of the two companies gives their approval, Shriram Group and IDFC will start the process to obtain the necessary regulatory approvals, the official said on conditions of anonymity.
IDFC Bank did not respond to a query regarding the issue. Earlier in July, the two companies had announced that they are exploring a merger that would help build a mass retail franchise with a universal bank at its core, which would offer customers a wide range of products.
According to the details of the merger shared by the two companies, Shriram City Union, a provider of retail finance, would be merged into IDFC Bank. Shriram Transport Finance, a leading financier of pre-owned commercial vehicles, would be delisted and would become a wholly-owned subsidiary of IDFC. The life and general insurance businesses of the Shriram Group would also become subsidiaries of IDFC, which would hold 75% stake in them. “Once the due diligence is done, getting the approval from the board is a routine matter. We don’t expect there will be any problem in getting the board’s approval. The idea is to look at the process with a positive note. After that, we will go ahead with the regulatory requirements,” the official said.
He said it was still too early to predict how long the regulatory approvals would take. Analysts have raised concerns over the fact that the Reserve Bank of India could have objections with IDFC holding Shriram Transport as a standalone non-banking finance company since the RBI’s regulations does not allow the holding company of a bank to run another entity that engages in a business that the bank can undertake.
Shortly after the deal was announced, in a call with investors, MD & CEO of Shriram Transport Umesh Revankar had said that obtaining some of the regulatory clearances could take time. The merger between the two groups would give IDFC Bank, a wholesale player with a corporate loan book, access to a strong retail franchise.