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"Today the boards of Shriram Group and IDFC entered into an exclusivity arrangement for 90 days to jointly explore the possibility of merger," he said in a press meet.
The merger is subject to approval from market regulator Securities and Exchange Board of India, the Reserve Bank of India, the Competition Commission of India and the Insurance Regulatory and Development Authority of India, he said.
The two groups have entered into a confidentiality agreement to evaluate a potential combination of certain businesses and subsidiaries/affiliates and associate companies of Shriram group with IDFC Group.
According to Piramal, the boards of directors of the companies have not approved any transaction.
The Shriram group, engaged in credit and non-credit (insurance) financial services, has three listed entities - Shriram Asset Management Company Ltd, Shriram City Union Finance Ltd and Shriram Transport Finance Company Ltd - operating in the non-banking finance domain.
It also has life insurance joint venture with South Africa's Sanlam and its own general insurance company.
As per broad scheme of merger between IDFC Group and Shriram Group, the two insurance companies and listed Shriram Transport will become subsidiaries of IDFC. The other listed entity Shriram City Union Finance will be absorbed by IDFC Bank.
The operating businesses of both the groups will come under IDFC.
According to Shriram Capital, along with its operating entities the overall customer base is in excess of 12 million, and it has more than 60,000 employees across 3,000 offices.
The merger if transpires will create a financial conglomerate.