Shriram Finance slips 7% as additional 174 mn shares get listed on bourses

17,43,44,710 equity shares of Rs 10 each of Shriram Finance were listed and permitted for trade on the exchange with effect from Thursday, December 29, 2022.

Shares of Shriram Finance (SFL; erstwhile Shriram Transport Finance Company Limited [STFCL]) slipped 7 per cent to Rs 1,294 on the BSE in Thursday’s intra-day trade after listing of additional 174 million equity shares of the company allotted pursuant to composite scheme of arrangement and amalgamation (scheme) involving various Shriram group entities. In comparison, the S&P BSE Sensex was down 0.65 per cent at 60,514 at 09:46 AM.

“17,43,44,710 equity shares of Rs 10 each of Shriram Finance are listed and permitted for trading on the exchange with effect from Thursday, December 29, 2022,” BSE said in notice dated December 28, 2022.

The equity shares issued pursuant to the composite scheme of arrangement and amalgamation between Shrilekha Business Consultancy Private Limited and Shriram Financial Ventures (Chennai) Private Limited and Shriram Capital Limited and Shriram Transport Finance Company Limited and Shriram City Union Finance Limited and Shriram LI Holdings Private Limited and Shriram GI Holdings Private Limited and Shriram Investments Holdings Limited and their respective shareholders issued pursuant to the composite scheme of arrangement and amalgamation.

As part of this process, Shriram City Union Finance Ltd (SCUF) and Shriram Capital Limited (after the de-merger of a few undertakings from the said Shriram Capital Limited) were amalgamated with erstwhile STFCL. Subsequently, the name of STFCL changed to Shriram Finance Ltd.

This has resulted in the entity becoming the largest retail non-banking financial company (NBFC) in India in terms of the size of the assets under management (AUM). SFL has become a diversified player with AUM of Rs 1.71 trillion as on September 30, 2022. It caters to over 6.7 million customers across India.

The amalgamation provides scope for increasing the expansion and penetration of each company’s (SCUF and STFCL) products in other regions. However, the manpower and skillset requirements are different for different products. The ability of the company to leverage the scale benefits by expanding the product offerings in the erstwhile SCUF and STFCL branches and growing these products in untapped regions is key to achieving double-digit growth in AUM, CARE Ratings said in its rationale dated December 22.

The ratings also derive strength from the long-standing experience of the management team in their respective product segments; the adequate capital buffers, which are expected to remain strong; and the improved asset liability profile, with the combined entity benefitting from the relatively shorter tenure of loans of SCUF, the rating agency said.