IDFC and Shriram Group shares trade weak on proposed merger talks

Shriram City Union and Shriram Transport Finance were down 4%, while IDFC down 3% on BSE

Shares of IDFC, IDFC Bank, Shriram Transport Finance and Shriram City Union Finance were trading weak in otherwise firm market after IDFC and Shriram group on Saturday said they had entered 90 days of merger talks.

Among the individual stocks, Shriram City Union Finance and Shriram Transport Finance were down4% each at Rs 2,386 and Rs 1,044, respectively. IDFC was down 3% at Rs 58, while IDFC Bank 2% at Rs 63, after hitting high of Rs 69 on BSE in intra-day trade. At 09:30 am; the S&P BSE Sensex was up 0.75% or 235 points at 31,596.

Under the tentative arrangement, IDFC will be the holding company of the merged entity; Shriram City Union Finance, the retail lending arm of Shriram Capital, will be merged with IDFC Bank; and Shriram Transport Finance will be a fully owned subsidiary of IDFC, which will also own 75 per cent of the life and general insurance arms of Shriram Capital. CLICK HERE TO READ FULL REPORT.

The entire merger process looks quite complex and even the IDFC Bank management has said that they hope to complete the merger in 12 months, excluding the exclusive 90 days period, if all regulatory approvals come in.

“The deal seems a positive for IDFC Bank. IDFC Bank has been struggling to expand in the retail space ever since its transformation from an NBFC to a Bank and the merger will allow it to access the around 1000 branches of the Shriram group entities. This will also help meeting the priority sector lending for IDFC Bank,” Angel Broking said in a note.

While in the absence of the swap ratio it is not clear how much Shriram Group companies shareholders will benefit, for IDFC Bank’s shareholders it can be a positive outcome as it given the much needed diversifications for the bank, added report.