Piramal Enterprises Ltd has sold its stake in Shriram Group’s commercial vehicle financing arm in a transaction that is likely the first step by the billionaire Ajay Piramal-led company to fully exit the Chennai-based non-bank lender.
Mumbai-based Piramal Enterprises said in a stock-exchange filing on Monday it sold its entire 9.96% stake in Shriram Transport Finance Company Ltd to third-party investors. It didn’t name the investors or specify the deal value.
Piramal Enterprises said in a separate statement this divestment is in line with its pre-stated intent and a broader strategy “to leverage the huge opportunities for strategic growth” in its own financial services business.
Shares of Shriram Transport fell as much as 7% on the BSE to Rs 1,006.25 apiece, before paring the losses a tad. Stock-market data indicates Piramal likely offloaded the stake for an estimated Rs 2,300 crore ($330 million).
Piramal Enterprises had bought the stake in the non-bank lender in 2013 for Rs 1,652 crore ($307 million then). It later picked up a stake of about 20% in Shriram Capital Ltd and 10% in Shriram City Union Finance Ltd. Shriram Capital is the group holding company, Shriram Transport mainly finances second-hand trucks and Shriram City focuses on consumer lending.
Piramal had started investing in Shriram companies at a time when they were looking to take a banking licence. The move was part of Piramal’s plan to enter the banking sector and expand its own financial services business.
However, Shriram Group didn’t get a banking licence. In 2017, Piramal attempted to sell its stake in Shriram Group when the latter proposed to merge its businesses with financial services conglomerate IDFC Group and IDFC Bank. However, the talks fell through due to disagreements over a deal structure and valuation.
Talk of Piramal’s planned stake sale in Shriram Group companies again gained momentum earlier this year. At a post-earnings conference call in April, Ajay Piramal admitted such a proposal was being considered.
“We are also evaluating whether it makes sense and value for Piramal as well as Shriram if there is an exit possible. There is no time limit to do it. If we find there is a right counterparty and where we can get the right value we can exit,” he said at the time.
Piramal had also said that another proposal that was being evaluated was to merge all entities of Shriram Group. “One of the ways to create value for all shareholders is to merge all the entities together. We are examining whether all the Shriram entities -- Shriram Capital, Shriram Transport and City Union – can be merged,” he had said.
However, Monday’s stake sale in Shriram Transport suggests the merger plan didn’t move forward and Piramal could now sell its holdings in other Shriram companies individually.