Mauritian private equity firm TPG India Investment today got government approval to invest up to Rs 805.61 crore in South India-based Shriram Group's retail finance venture -- Shriram Retail Holdings.
"The approval is for issuance of equity shares and warrants in Shriram Retail to TPG India, Mauritius," Science and Technology Minister Kapil Sibal told reporters after a meeting of the Cabinet Committee on Economic affairs.
Post the approval, TPG India (TPGI) will be issued 18.34 lakh equity shares and 15.38 warrants of Shriram Retail Holdings.
"The approval would result to a foreign direct investment amounting to Rs 805.61 crore," Sibal added.
The nod, however, is subject to the conditions recommended by the Foreign Investment Promotion Board (FIPB), he said.
In September, TPGI and Shriram City Union Finance, the consumer finance arm of the Shriram Group, had entered into a definitive agreement under which the private equity firm would invest up to USD 120 million (Rs 530 crore) to acquire a stake of up to 49 per cent in Shriram Retail Holdings (SRHPL), the holding company of Shriram City Union Finance (SCUFL).
Subsequently, TPGI made an open offer to the shareholders of Shriram City Union Finance for acquiring a further 20 per cent stake in the company for about Rs 431 crore. The open offer began on November 8 and closed on November 27.
The open offer was made to acquire up to 1,07,85,500 shares, representing 20 per cent stake in the company at a price of Rs 400 per share.
The deal, one of the few PE deals this year where the investor has picked a majority stake in an Indian firm, will give TPG control of Shriram City Union Finance, the public listed retail lending business of the Shrirams. Shriram Retail Holdings, presently a privately held entity of the promoters, owns 51% in Shriram City Union Finance.
It is just one of the two national retail financers of segments like consumer durables, the other being Bajaj Auto Finance (in which ChrysCapital has invested). Other large national players such as ICICI and Citibank had sometime back folded their loss making durable financing business.