IDFC-Shriram merger deadline extended to Nov 8

The IDFC Group and Shriram Group, which has earlier announced an exclusive discussion period for a proposed merger has been extended to another 34 days, till November 8, 2017. The decision comes after a period of 90 days of exclusive talks for the merger, which has been speculated to see several regulatory hurdles.

A regulatory filing by Shriram City Union Finance Ltd said, "The discussions between the Shriram Group and IDFC Group regarding the potential combination and the due diligence exercise is continuing and the parties have agreed to extend the exclusivity period up to November 8, 2017."

The Groups on July 8, 2017, has announced that they have entered into a 90-day Confidentiality, Exclusivity and Standstill Agreement (CES) to evaluate a potential combination of certain Shriram Group entities in credit and non-credit financial services sector with the IDFC Group, subject to regulatory approvals and various other processes including due diligence.

The deal has been expected to go through various regulatory hurdles including from the Reserve Bank of India (RBI), National Company Law Tribunal, Competition Commission of India, Insurance Regulatory and Development Authority and Securities and Exchange Board of India.

The deal structure, as announced earlier, was to keep Shriram Transport Finance out of the banking entity of IDFC, considering various issues on merging the large NBFC into the bank. While the assets of Shriram City Union Finance was planned to be merged with the Bank, the employees of this NBFC was expected to be kept as banking correspondents. There were also issues related to the speculations that Shriram Capital and Piramal Group Chairman Ajay Piramal, who has exposure in real estate business and holds around 20 per cent stake in Shriram Capital, entering into banking business through the deal, which is against the policies of RBI.

There have been discussions going on from July 8, and it has been reported earlier that there might be some tweaking in the tentative plan presented in July.

In September, Ajay Piramal, chairman of Shriram Capital and Primal Enterprises, said, "We will explore ways to see if the merger works out on the basis of what the Reserve Bank of India (RBI) approves and what the valuations are. We are still looking into it."

R Thyagarajan, founder of Shriram Group, on September 27, said that the discussions are going on satisfactorily. "Timeframes in such matters have to be flexible and they are," he added.

IDFC and IDFC Bank put together have a loan book of Rs 60,000 crore while STFC and SCUF put together has a loan book of Rs 1,05,000 crore, according to an Angel Broking report at the time of the announcement of CES.