Shriram Group drops plan to acquire Citi Financial India

The city-based Shriram Group has pulled out of the race to acquire Citi Financial India, a struggling non-banking finance company (NBFC), by citing reasons ranging from the high cost of people to low returns on mortgage business, a highly delinquent loan book and lack of tax benefits in the proposed structure.

Besides, a senior official in the group said that the 1,500 employees of the NBFC were ‘very different’ and could not be an integral part of the diversified group.

“It will not be a match for the Shriram Group, both in terms of culture and portfolio,” the official said.

Market sources say Citi Financial has been struggling with bad loans.

The Shriram Group had even started due diligence activities for the deal, but came to this conclusion after studying Citi Financial India, which had been looking for potential buyers.

In the past few months, reports have suggested names of other potential bidders, including Lakshmi Vilas Bank, which have been doing due diligence for a possible acquisition.

Earlier this month, sources in the group had said that the acquisition would be done either through their consumer finance arm, Shriram City Union Finance (SCUF), or a proposed housing company.

SCUF has a market cap of Rs 2,500 crore and an asset base of around Rs 6,000 crore. So far, the company has been operating in Tamil Nadu and Andhra Pradesh. “Now that it has been decided to go pan-India, instead of going on our own, we have decided to take the acquisition route. Citi Financial is a good bet for us,” sources had said.

Citi Financial has 110 branches and 1,500 employees in the country. The company has an asset base of Rs 7,000 crore, of which home loans are Rs 5,000 crore. The NBFC has a customer base of around 700,000 and has a good technology network.