Morgan Stanley and
are advising Shriram Capital, the unlisted holding company of the group. The proposed reorganisation, if approved by a majority of minority shareholders and regulators, will lead to a simplified corporate structure and allow its investors- billionaire Ajay Piramal and TPG Capital -an exit from the privately held entity.
To Have ₹1.5 Lakh Crore of AUM
Piramal Enterprises Ltd., which bought TPG’s stake in Shriram’s transport finance unit in 2013, tried and failed to combine the Chennai-based group with IDFC Ltd. more than two years ago. The merged lending entity will also have Rs1.5 lakh crore of assets under management, making it among the top five shadow lenders in the country. The group, headed by patriarch R Thyagarajan, is expected to approach the respective boards and shareholders in the next fortnight.
MERGER CONTOURS
Under the composite scheme that is being considered, two listed companies, Shriram Transport Finance Co.(STFC) and Shriram City Union Finance Ltd (SCUF) are to get merged. Shiram Capital owns a quarter of STFC, which has a market capitalisation of Rs 44,726.94 crore, while it owns 34.6% of SCUF, whose current market capitalisation is Rs 14,314.15 crore. Shriram Transport is a leading financier of new and pre-owned trucks. Shriram City Union, is a non-bank finance company that gives loans for consumer goods, gold and motorcycles, where it is a market leader.
Once the merger between the two listed companies takes place, Shriram Capital is likely to get reverse merged into the new combined listed entity. Shriram Capital is being valued at Rs 25,000 -28,000 crore, said sources within the group on condition of anonymity as the talks are in private domain. Shriram Ownership Trust and Shriwell Trusts together own 42.9% of the unlisted Shriram Capital; Sanlam Group has a 26% stake, while the Piramal Group has 20%. TPG Capital owns 9.4% and individuals own the residual 1.7% as on March 2021, according to Crisil.
Shriram Capital also houses its life and general insurance businesses, a 77:23 JV with South Africa’s Sanlam Group. As part of the overall group amalgamation process, the insurance venture is expected to be spun out or demerged into a separate unlisted company. The reason, explain sources, is RBI’s discomfort about listed shadow banks owning stakes of over 50% in insurance businesses and was one of the reasons why the Shriram merger plan was called off last year. For example, in the past, the regulator had given a conditional nod for the merger between Apollo Munich Health Insurance and HDFC Ergo, subject to parent HDFC Ltd’s stake in the merged company not exceeding 50%.
“The Shriram Group denies all such speculations. These are nothing but speculations based on old discussions, now resurfacing. We will formally communicate to all stakeholders if, at any stage, the group decides to restructure its holding/operations,” Shriram Group’s spokesperson Ravi Subramanian told ET when inquired about the merger plans.
The sources cited warned that the contours of the merger is yet to be voted upon and no final decision has yet been reached. Bloomberg was the first to report about the impending merger on Monday evening.
Additional reporting by Rajesh Mascarenhas
