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Mumbai, July 8: Infrastructure Development Finance Company Bank (IDFC Bank) and Shriram Group’s holding firm Shriram Capital have agreed to explore a merger for the creation of one of the country’s largest retail banks, which could be valued at more than Rs65,000 crore.
The boards of both companies met Saturday to discuss the merger. Shriram Capital chairman Ajay Piramal later told reporters: “The managements have been given 90 days to explore the merger and that share swap ratio will be decided after this.”
A business daily has also reported that Reserve Bank of India has given its verbal clearance for the merger of entities. IDFC Bank has a strong presence in Madhya Pradesh, Karnataka and Maharashtra, with about 75 branches.
Shriram Transport Finance is to remain a separate entity post-merger, Piramal said, and added that all other operating companies of the Shriram Group, including Shriram City Union Finance, will merge with the bank, creating a Rs20,000-crore retail entity.
Shriram Transport Finance has about 1,000 branches around the country, and Shriram City Union Finance has 85 branches. The merger is expected to help IDFC Bank enlarge its retail portfolio.
IDFC Bank’s Rajiv Lall said they hope to complete the merger within 12 months, excluding the exclusive 90-day period, if all regulatory approvals come in.
He also said the share swap ratio will be decided only after the 90 days due diligence.
The deal will allow IDFC Bank to get the branch presence it badly needs, to the tune of 1,000 branches, while Shriram will get more wholesale assets, the companies said.
Lending business of Shriram Capital includes listed firms Shriram Transport Finance and Shriram City Union Finance, while the unlisted life and general insurance businesses of the group may get merged with IDFC, which owns 52.86 per cent stake in IDFC Bank.
IDFC Bank was launched in late 2015 in the latest round of bank licences and took over all its parent IDFC Ltd’s infra assets.
Shriram Transport Finance is the largest financier of commercial vehicles in the country, while Shriram City Union Finance is a leader in home, auto and personal loans. Both the companies are promoted by Shriram Capital, which is now headed by Piramal as chairman since 2015 when he invested around Rs5,000 crore into the Chennai-based company.
Piramal Enterprises owns 20 per cent stake in Shriram Capital and 10 per cent each in Shriram Transport Finance and Shriram City Union Finance.
