Shriram Group not looking at merging entities for now, says R Thyagarajan

R Thyagarajan, founder of Rs 1,000-billion Shriram Group, has denied reports that the company plans to raise $3 billion from private equity (PE) funds after merging its listed non-banking financial companies (NBFCs) — Shriram Transport Finance Corporation (STFC) and Shriram City Union Finance (SCUF) — and the holding company Shriram Capital. In an interview, he told T E Narasimhan that the Group was running business and there were a few proposals in hand. Edited excerpts:

Reports say Shriram Capital, STFC, and SCUF are going for a three-way merger and that PE majors KKR and Blackstone may buy a stake in the entity from which investors are looking to exit. Is it true?

There is no basis for the report. You can ignore them.

Is there any chance of merging these entities? Are you looking for an investor?

No. I wouldn’t say there is any chance as of now. If someone comes to buy a stake at a valuation like Rs 500 billion, anybody will say okay. But the chances of anybody coming and saying that is zero. 

You have not ruled out a possibility of merging STFC and SCUF. Also, you have said you are looking for a partner through IDFC. What is the status?

We aren’t looking for anything. If there’s an opportunity to do something different, we would like to explore. IDFC was an opportunity to get into a small bank. We explored it, but we realised that it won’t work. So, we abandoned it. 

It does not mean we have decided to go into something and then gone back. Every commercial enterprise will have to do a bit of exploration on a continuous basis, otherwise, you miss out on opportunities. Any organisation would do it and do it quietly. Sometimes you get publicity, as it did happen in the case of IDFC. Not that we wanted it, but it was said that the regulations require that before you talk to IDFC, you should inform Sebi, newspapers, etc., which was wrong, I suppose. It got unnecessary publicity before anything could even happen. People come with proposals, and we examine them. It doesn’t mean we have committed to anything. Right now, we are looking at about three or four such proposals.

What is next?

We are focusing on running our businesses better. We would like to have our premium in general insurance going up from Rs 25 billion to Rs 35 billion, profits to go up from Rs 7 billion to Rs 10 billion. 

In the life insurance company, we would like to see the premium to grow from Rs 5.3 billion to about Rs 10 billion, and the valuation to grow to Rs 80 billion. In the lending business, we plan to show an increase of 15-20 per cent in lending and profitability, etc. 

This is an ongoing thing, it will never stop. We are doing extremely well in the insurance businesses. 

PE players or others with you may need an exit?

TPG has been with us for a long time. They have done two exits. Maybe in the next few months, they may exit the Shriram Properties where they have a stake. At some point, they may exit Shriram Capital, too. The exit is a common thing for PEs. It is not that they are urgently trying for an exit. We should get more good people to work for us. 

If we have good people coming in, in the management level, that will benefit. We are not looking at any outsiders. We keep an eye on talent.