Shriram to merge all financial services business

Under the restructuring plan unveiled on Monday, unlisted Shriram Capital will merge with Shriram City Union Finance Limited and Shriram Transport Finance Company Limited to form the country’s largest retail finance non-banking financial company (NBFC).

This will result in the exit of Ajay Piramal-led Piramal Group and TPG Shriram Capital. Both the investors had been looking to exit Shriram Capital for the past few years after the failed merger attempt with IDFC Bank in 2017. IDFC Bank later merged with Capital First, a private lender promoted by Warburg Pincus.

Backing the merger plan, Ajay Piramal, Chairman, Piramal Enterprises Ltd. said, “While they have emerged as the largest retail finance NBFC, it also opens up immense opportunities for them with synergies.”

Piramal buys 20 percent stake in Shriram Capital 2,014 crore in 2014. Piramal also holds 10% stake in Shriram City Union.

TPG holds 9.4% stake in Shriram Capital, while South Africa-based Sanlam Group holds 26% and Shriram Ownership Trust and Shrivel Trust hold 30.7% and 13.4% respectively.

Shriram Transport Finance, a subsidiary of Shriram Capital, is India’s largest commercial vehicle financier, while Shriram City Union Finance is a diversified NBFC that primarily lends to the under-served segment.

Shriram Capital, through its affiliates, has a customer base of approximately 21.65 million, managed by approximately 67,000 employees across 4,000 branches. The company posted a net profit of 4,900 crore in FY 2011 and assets under management or AUM in excess of 2 trillion by 30 September.

In a statement, the company said that the merger will be done through arrangement and a holistic plan of amalgamation. As part of the plan, the shareholders of Shriram City Union will get 1.55 shares for each share of Shriram Transport. Similarly, shareholders of Shriram Capital will get 0.0978 shares for every share of Shriram Transport.

The transaction is subject to the approval of the shareholders of the three companies.

Shriram Group said the consolidation will help the group combine its loan products including commercial vehicle and two-wheeler loans, gold loans, personal loans, automobile loans and small venture financing. According to a statement from the company, it will also form a comprehensive cross-sell program comprising insurance, broking and asset management businesses, including their depositors.

The AUM of Shriram City Union Finance is 35,000 crore and a distribution network of around 950 branches. Post merger with Shriram Transport, the combined AUM of the merged entity shall be at least . Will happen 1.5 trillion and a distribution network of over 3,500 branches. The similarity in the technology infrastructure of the two companies will ensure that their branches can serve each other’s business in a short span of time, the statement said.

“The merger will increase our distribution footprint across all business lines without any incremental capex. The benefits due to synergy and digital initiatives are immense. DV Ravi, Managing Director, Shriram Capital said, “This merger will also simplify our holding structure by eliminating multiple layers.

According to Shriram Capital, with the amalgamation exercise increasing its customer base, the group’s focus will shift towards creating digital loan products.

“The company intends to launch a super-app soon, where all its existing and new lending products will be offered under the Shriram Finance umbrella. This will help customers access the entire Shriram ecosystem with a single click and provide a seamless customer experience.”

“Shriram Finance will undoubtedly become the market leader for financial services in rural India,” said Umesh Revankar, Vice President and Managing Director, Shriram Transport Finance.

YS Chakraborty, Managing Director and CEO, Shriram City Union Finance said that Shriram Group has always placed the credit-hungry segment of customers at the center of all its products and innovations. He said that the merger is another step towards simplifying and offering customers solutions for all their financial needs under one umbrella.

Revankar will be the vice-chairman of the merged entity and Chakraborty will be the managing director and CEO.

Morgan Stanley and ICICI Securities acted as financial advisors, while the valuation exercise was conducted by Bansi C. Mehta & Co and EY.

According to the statement, HSBC and JM Financial assisted with an unbiased opinion indicating whether a particular deal is fair to shareholders, while PwC Shriram Transport and Shriram City Union Finance were asked to navigate the post-merger amalgamation process. will help.