India’s largest vehicle financier Shriram Group, is a few weeks away from promoting the country’s second largest diversified non-banking finance company (NBFC), following the approval of the Chennai bench of the NCLT on Wednesday.
The special bench has approved the three-way merger of Shriram Capital and Shriram City Union Finance with Shriram Transport Finance, to create a combined entity called Shriram Finance.
Sources in the know said that the merged entity Shriram Finance may be set up by November 25, and shares of the entity will be listed on the bourses by mid-December.
In October, Shriram Transport MD and CEO Umesh Revankar had told businessline that the final hearing at NCLT was held on October 19 and the company was awaiting its nod.
“Once we get the order, then there should be another 15 days of completing RoC (Registrar of Companies) formalities before the final merger,” Revankar had said.
What’s now remaining for the Shriram Group is to approach the RoC, set a record date for shareholders, and notify the exchanges. Assets under management of the merged entity Shriram Finance are estimated to be ₹1.65-lakh crore.
Churn in shareholders
Shriram Group had announced the three-way merger in December 2021, wherein the swap ratio was fixed at 100 shares of Shriram City Union Finance for 155 shares of Shriram Transport Finance.
The Reserve Bank of India gave its go-ahead for the corporate rejig in June 2022. However, in addition to other regular approvals, the group also needed a nod from the insurance regulator IRDAI due to the de-merger of the life and general insurance arms from the non-operative holding company Shriram Capital.
businessline had earlier reported that Ajay Piramal-led Piramal Enterprises may exit the Shriram Group post the merger, whereas some large private equity investors, including Caryle and Apollo Global, have reportedly expressed interest in acquiring stake in the group.
US-based private equity major TPG and Apax Partners, which presently hold stake in Shriram Transport and Shriram City Union, are also expected to cash out their investments in the group — most likely not through the open market route.
“These investors are figuring out the least disruptive route to exit from the merged entity,” said a highly placed source.
In the past, Piramal opted for open market transactions to sell part of its stake in Shriram Transport and all of its stake in Shriram City Union. However, this time it is likely to opt for an “off-market exchange of shares” to maximise the value of the holdings, said another person aware of the matter.
Revankar had, in October, also said that Shriram Group is not looking to raise capital for the merger as both NBFCs are well-capitalised to fund the estimated loan growth of 15 per cent for the merged entity in FY23.
“Our capital adequacy is around 22 per cent, both tier-I and tier-II put together, Shriram City Union is also around 24 per cent. We are a little excess on capital, in the sense that our gearing is lower. So we would like to reach 5 times leverage and then think if we need to raise capital,” he had told businessline.