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Shriram, IDFC extend exclusivity period on proposed merger

05 October, 2017

Financial services conglomerates Shriram Group and IDFC Group have extended their 90-day confidentiality and exclusivity agreement for a potential merger of firms under them by an additional one month.

The confidentiality, exclusivity and standstill agreement is now extended to 8 November, both groups separately informed the stock exchanges on Thursday.

The groups  had signed an agreement to merge Shriram Group’s consumer lending arm merging with IDFC Bank. On 8 July, their boards had given an in-principle approval to evaluate a potential combination of some group companies engaged in credit and non-credit businesses.

“This is to inform that given the extensive due diligence process involved and the on-going discussions, the parties have agreed to an extension,” IDFC said in a filing.

The merger would also see Shriram Transport, besides the unlisted life and general insurance firms, falling under IDFC Ltd and operate as standalone companies.

The contours of the merger are being worked out and the companies have yet to decide a share-swap ratio. Any deal will be subject to various regulatory approvals.

The merger proposal will need clearances from the Reserve Bank of India, the Securities and Exchange Board of India, the Competition Commission of India and the Insurance Regulatory and Development Authority of India, said Ajay Piramal, chairman of Piramal Enterprises Ltd and Shriram Capital Ltd, the flagship company of Shriram Group.

Shriram Capital operates Shriram City Union and Shriram Transport. Piramal Enterprises owns a 20% stake in Shriram Capital and a 10% stake each in Shriram Transport and Shriram City Union.

A successful merger deal between the groups will see Shriram Transport getting de-listed from the stock exchanges. The combined entity will be named IDFC Shriram and will have a market value of around Rs 66,380 crore ($10 billion) at current rates. Its market value at the time of merger announcement stood at Rs 73,000 crore ($11.25 billion).

The market value of IDFC at Thursday’s closing share price was Rs 9,408 crore and that of IDFC Bank was Rs 19,271 crore. The market capitalisation of Shriram City Union was Rs 13,740 crore and that of Shriram Transport was Rs 23,960 crore.

IDFC Bank had started operations in October 2015 and listed on the bourses the following month. It started off as the seventh-largest private sector lender and 10th-largest bank by market value.

IDFC Bank has been striving to establish a strong retail franchise and had said that acquisitions would be a part of its strategy to increase its customer base. In 2016, IDFC Bank acquired Grama Vidiyal Micro Finance, which gave it access to 1.2 million rural and semi-urban households in Tamil Nadu, Kerala, Karnataka, Puducherry, Maharashtra, Gujarat and Madhya Pradesh.

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Shriram, IDFC extend exclusivity period on proposed merger

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