Private equity major TPG Capital is going to acquire direct stake of over 20 per cent in Chennai-based commercial vehicle financier Shriram Transport Finance Company (STFC), worth over Rs 2,000 crore, pursuant to a corporate restructuring where the holding arm of the promoters – Shriram Holdings (Madras) Pvt Ltd – is being merged with the public-listed STFC. TPG Capital holds 49 per cent stake in the privately held holding arm Shriram Holdings, which in turn, is the single largest shareholder of STFC.

As of September 2011, Shriram Holdings (Madras) had 41.27 per cent stake in STFC. With this move, TPG Capital will hold around 20.5 per cent stake in the company while the promoter Shriram Group will have approximately 21.5 per cent, said an STFC spokesperson when contacted by VCCircle.

The amalgamation is “subject to the approval of Madras High Court, and consents and sanctions of other regulatory authorities, shareholders, bankers, creditors and such other parties as may be necessary,” according to an STFC filing.

Post-allotment of shares after the merger, the existing shares of Shriram Holdings (Madras) will be cancelled. Also, additional 500,868 shares will be issued for dividend due worth Rs 28 crore to the holding company.

Shares of STFC were trading at Rs 465.9 a piece at 11:25 am on Wednesday, down 0.52 per cent in a Mumbai market up 1.66 per cent. At this rate, STFC has a market capitalisation of Rs 10,538.66 crore, which would value TPG Capital’s stake at Rs 2,160 crore.

TPG Capital, which operated through Newbridge Capital in Asia, invested $100 million or around Rs 450 crore in the company in 2005. Earlier reports suggested that TPG Capital was looking to exit its holding in STFC for Rs 3,000 crore and held talks with Japan’s Orix Corporation and Singapore-based sovereign wealth funds. In 2009, ChrysCapital exited STFC with returns of over 12x.

STFC has a network of 479 branches and service centres, nearly 12,000 employees and assets under management in excess of Rs 23,278 crore ($4.95 billion). STFC is also looking to enter the banking space under the new RBI regulations.

TPG investments in other Shriram Group firms include stakes in other holding companies like Shriram Capital and Shriram Retail Pvt Holdings. In March this year, TPG had acquired the assets of Vishal Retail for Rs 70 crore through Shriram Retail. It also invested $100 million in Shriram Properties, the real estate unit of the group.

In September 2008, TPG invested $120 million for 49 per cent in Shriram Retail, the holding company of Shriram City Union Finance. After that, it made an offer for Shriram City, which is also backed by a host of other PE investors like ChrysCapital, Norwest, Bessemer and ICICI Venture, among others.

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