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Shriram Transport's rating not immediately affected: Fitch

Press Trust of India  |  New Delhi 

Co's rating is not immediately affected by the announcement of IDFC's proposed with Shriram Group, Fitch Ratings said today.

Shriram Transport, the flagship company of Shriram Group that provides financing for used commercial vehicles, is unlikely to be affected based on the proposed group structure, it said.

Fitch believes regulatory approval from the RBI 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," Fitch said.

Group and Shriram Group last week announced that they have agreed to discuss a plan over a 90-day period.

During this time, the managements would look to finalise details such as swap ratio, and seek the requisite approvals from various regulators overseeing banking, insurance, and capital markets.

"In the event the proceeds, Fitch 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 merger," Fitch said.

Any changes that materially alter or impact Shriram Transport's standalone profile could lead to a review of its rating, the US-based agency said.

"While it may be difficult to assess the impact of the now, the agency is cautious about the potential benefits for Shriram Transport, which has a unique business model, and a different customer base and distinct culture compared with Group, which transformed from an infrastructure company to a commercial in 2015," Fitch said.

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

First Published: Fri, July 14 2017. 16:22 IST