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Proposed merger may not impact Shriram Transport ratings:Fitch

Press Trust of India  |  Mumbai 

Global rating agency, Fitch Ratings today said the proposed of the Group and Shriram Group is unlikely going to have any immediate impact on ratings of

Last week, the infra lender and the Piramal Group-backed financial services major Shriram Group had agreed to exclusively discuss a plan over a 90-day period.


Over the period, the managements of both the companies would look to finalise details such as the swap ratio, and seek the requisite approvals from various regulators overseeing the banking, insurance, and capital markets.

The proposal will maintain Shriram Transport as a separate subsidiary that will be 100 per cent owned by the merged entity, alongside Bank, the main operating entity under Group.

"Shriram Transport, the flagship company of the Shriram Group that provides financing for used commercial vehicles, is unlikely to be affected based on the proposed group structure," the rating agency said in a note today.

However, it said that the structure itself may encounter stiff regulatory challenge.

The agency believes that regulatory approval from the Reserve will be the biggest hurdle to the proposed

"The RBI had previously taken the view that banks cannot undertake any business activity through a separate entity that can be done within the bank; and the proposed structure of having a non-financial institution alongside the could be a significant barrier to the merger," the note said.

In case the proceeds, the rating agency said it would review the final terms of the and assess the impact on the rating based on the final structure, the role of Shriram Transport within the larger Group and any potential synergies that Shriram Transport may derive from the

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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