Shriram Capital, IDFC boards enter into 90-day exclusive talks for merger

Financial majors Shriram Group and IDFC have announced a possible merger to create a “financial conglomerate”, a top company official said here on Saturday.”Today the boards of Shriram Group and IDFC entered into an exclusivity arrangement for 90 days to jointly explore the possibility of a merger”, Ajay Piramal, Chairman of Shriram and Piramal group, said in a press meet.The merger is subject to approval from market regulator Securities and Exchange Board of India, Reserve Bank of India, Competition Commission of India and Insurance Regulatory and Development Authority of India, he said.None of these transactions has been approved as yet. “Our partnership with Piramal has given us the strength to go ahead with this merger”, said Thyagarajan.Another observer told PTI that the merger is forced by poor showing of both entities. I wish this marriage happens.Post approval, both the groups expect the merger to take atleast 12 months for completion.”Now, diligence will take place, we will discuss on the valuations and the respective boards will then meet and then a proposal will be made”. Piramal owns 20 per cent in Shriram Capital and 10 per cent each in both Shriram Transport and Shriram City Union.On the proposed contours of the merged entity, Lall said, “It will be a conglomerate”.IDFC has dropped the biggest hint about merger talks with Shriram Group on Thursday.In the conference, it was mentioned that two groups businesses to come under IDFC Limited. Sanlam now holds a 26 percent stake in Shriram Capital through Sanlam Emerging Markets (SEM).The Ajay Piramal-led Piramal Enterprises Ltd (PEL) now holds an effective 20 percent equity stake (Rs 21.5 million) in Shriram Capital, an equity stake of 9.96 percent (Rs 16.4 billion) in Shriram Transport Finance Limited (STF) and 9.98 percent (Rs 8 billion) in Shriram City Union Finance Limited (SCUF). “Under the circumstances, we are unable to confirm or deny the news reports”.It must be noted that Piramal, who has been chairman of Shriram Capital since November 2014, has refrained from merging PEL’s financial services businesses with that of Shriram’s.”Over the years we have grown on the strength of our partnerships”. IDFC Bank and IDFC did not inform the stock exchanges of any board meetings so far.IDFC Bank, a subsidiary of IDFC, is a universal bank, offering financial solutions through its nationwide branches, internet and mobile.Also, since most of IDFC Bank’s lent to corporates and infrastructure projects, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.This merger is expected to create over Rs 63,000 crore business in the non-banking financial sector. IDFC Bank closed at Rs64.75, up by 2.2%.