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IDFC Bank, Shriram Capital plan mega merger, talks to begin next week

Talks begin next week for an all-stock deal to create a Rs 60,000-cr powerhouse

Dev Chatterjee Abhijit Lele & T E Narasimhan  |  Mumbai & Chennai 

Deal structuring eased, teething troubles remain

The Chennai-based and Bank are set to begin 90 days of exclusive negotiations next week for an all-stock that could create a Rs 60,000-crore financial powerhouse, with both groups filling gaps in each other’s businesses.

According to an investment banking source, the lending business of the Shriram group, which includes listed such as and Shriram City Union Finance, could be merged with Bank, while the unlisted life and general insurance could be merged with

Post-merger, both Shriram Capital, the holding company of the group, and the BSE-listed will emerge as holding of the new entity.

A board meeting of has been called on Saturday to discuss the Bank and did not inform the stock exchanges of any board meetings till Thursday evening.

If the fructifies, it will provide liquidity to Piramal Enterprises’ 2014 investment of Rs 2,014 crore for a 20 per cent stake in the unlisted

The Piramal group had started investing in the Shriram group by acquiring a 10 per cent stake in Company for Rs 1,636 crore in 2013. Company has a Rs 30,000-crore truck financing business.

A year later, the Piramal group invested another Rs 790 crore in Shriram City Union, a consumer and gold finance company, for a 10 per cent stake.

In 2015, Ajay Piramal finally took over as chairman of Rajesh Laddha, former chief financial officer of Piramal Enterprises, was appointed managing director and chief executive officer of the company last month.

After merger, Piramal Enterprises would not be able to own more than a 10 per cent stake in the merged entity under the Reserve Bank of India’s norms on corporates owning stakes in banks, said a banking source.

The with will help the group to meet its financial inclusion targets and increase its retail portfolio. Bank’s loan portfolio is made up predominantly of corporate and infrastructure advances. With problems in the infrastructure sector and tepid demand for corporate credit, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.

An Bank statement said the bank kept evaluating opportunities and if anything concrete fructified it would inform the stock exchanges. “At this point, there is nothing that can be disclosed,” it said in a statement to the stock exchanges. “Under the circumstances, we are unable to confirm or deny the reports.

Meanwhile, we cannot comment on market speculations,” it added. A similar statement was issued by the Shriram group’s listed

The stock prices of all the reacted positively following reports of the talk on Thursday.

Piramal Enterprises’ shares were up 4.5 per cent to Rs 2,938 a share and its market capitalisation crossed Rs 50,000 crore.

The stock price of IDFC, the holding company of Bank, was flat at Rs 60 a share, while Bank’s shares were up 1.7 per cent.

Among the Shriram group companies, the Company stock was up 1.2 per cent, while was down by 1 per cent.

Taking into account today’s market capitalisation, the will create a Rs 60,000 crore plus entity. and its operating entities have a customer base of over 12 million, more than 60,000 employees in 3,000 offices, net profit of Rs 2,200 crore and assets under management in excess of Rs 90,000 crore. Its chit fund business is housed directly under the Shriram Ownership Trust and is not expected to be affected by the


First Published: Fri, July 07 2017. 08:40 IST