TPG-backed Shriram Capital may merge with IDFC Bank
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Infrastructure financing company IDFC Ltd, which started its banking operations two years ago, and Piramal Group-backed financial services firm Shriram Group are reportedly exploring a merger that could value the combined entity at over Rs 65,000 crore ($10 billion).

The lending business of Shriram Capital Ltd, which includes listed firms Shriram Transport Finance and Shriram City Union Finance, is likely to be merged with IDFC Bank, according to a report by CNBC-TV18 news channel. The unlisted life and general insurance businesses of the group may get merged with IDFC, which owns 52.86% stake in IDFC Bank Ltd.

The firms may announce the deal on Saturday, the report said.

News agency Reuters reported that IDFC and Shriram are said to have exclusivity of 90-120 days for the merger talks.

Both firms declined comment in their stock-exchange filings.

“We keep evaluating opportunities from time to time and should anything concrete fructify, we will inform the exchanges as appropriate. At this point, there is nothing that can be disclosed,” IDFC said.

“The company continuously evaluates various opportunities for enhancing the stakeholders’ value. As and when such proposals are considered, the company shall comply with the disclosure obligations,” Shriram City said.

Shares of IDFC closed at Rs 59.90 apiece, down 1.16%, on the BSE while those of IDFC Bank closed at Rs 64.75 apiece, up 2.21%.

The Economic Times observed that the merger of Shriram Capital with IDFC Bank would make the former a subsidiary of the latter, given the Reserve Bank of India's regulations restrict banks to lend separately through subsidiaries.

Shriram Transport shares ended the day at Rs 1,090.65 apiece, down 1.56%, on the BSE. Shriram City Union declined 1.3% to close the day at Rs 2,487.50.

Another report in the Mint newspaper said, citing a person close to the development, that the two companies have just started the talks and details of share swap need to be worked out. The deal has many hurdles to cross, it said, citing another person in the know of things.

Shriram Transport Finance, the country’s largest financier of commercial vehicles, and Shriram City Union Finance, a leader in home, auto and personal loans, are promoted by Shriram Capital, the overarching holding company for the financial services and insurance businesses of the Shriram Group.

Piramal Enterprises owns 20% stake in Shriram Capital and 10% stake in both Shriram Transport and Shriram City Union. Ajay Piramal, chairman of the Piramal group, became chief of Shriram Capital in 2015.

IDFC Bank, which started its banking operations in October 2015, listed on the bourses the following month. It started off as the seventh-largest private lender and the tenth-largest bank overall by market value.

Acquisitions have been a part of its strategy to increase the customer base. In 2016, it 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.

TPG Capital is a shareholder in Shriram Capital while private equity major Apax Partners picked up 20.37% stake in Shriram City Union Finance in 2015. Shriram Transport counts Temasek, GIC and Abu Dhabi Investment Authority among its shareholders.

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