Private equity firm TPG India Investments has received green signal from market regulator Sebi to make an open offer to acquire a 20% stake in Shriram City Union Finance from public shareholders. The offer is slated to open on August 27 and close on September 15, almost 10 months behind its original date.
The offer is to acquire upto 10.7 million shares at a price of Rs 400 per share. If the offer is fully successful, TPG will shell out around Rs 400 crore or $90 million. Shares of Shriram City closed at Rs 392, up 0.5% on the BSE on Tuesday. DSP Merrill Lynch is acting as the manager to the offer on behalf of Shriram Retail Holdings.
The deal followed the transaction last year where TPG announced it would pick upto 49% in Shriram Retail Holdings (SRHPL), the holding company of Shriram City Union Finance. Although TPG was not taking over control of the holding company, it is making an open offer as it will indirectly hold 26.7% in Shriram City Union.
As per Indian takeover code, a purchase of a 15% stake in a firm triggers a mandatory open offer for another 20%.
TPG was issued shares and warrants of SRHPL in January 2009. The shares represent 39% of the post issue capital of the holding firm. Established in 1986, Shriram City Union is a deposit-accepting non-banking financial company specialising in small-sized retail finance. With over 633 outlets across the country, it has presence in consumer durables and automobiles financing besides personal loans and small business loans. During FY09 it had net profit of Rs 117 crore on revenues of Rs 933.9 crore.
The company has been attracting investments from PE firms. Venture capital firm Norwest Venture Partners recently picked up a 10% stake in the firm through open markets. SCUF has also had other investors like ChrysCapital, ICICI Venture, Bessemer Venture Partners and Cambridge Place Investment Management (CPIM).
SCUF is just one of the two national retail finance firms present in segments like consumer durables, the other being Bajaj Auto Finance (in which ChrysCapital has invested). The other large national players such as ICICI and Citibank had folded their loss making durable financing business sometime ago.