A day after IDFC Ltd and Shriram Capital Ltd called off a proposed merger due to differences over valuation, R. Thyagarajan, founder of the South India-based group, said that it’s too early to write an obituary for the IDFC-Shriram deal.
In an interview, Thyagarajan said that Shriram will continue talking to IDFC. Edited excerpts:
Will you talk to IDFC again?
Probably, yes. Why not? I believe if we keep talking and providing information of the right kind and logic of the right kind, I think all sensible people could be convinced.
Rajiv Lall (chief of IDFC Bank) said that Shriram group didn’t make a counter offer. Why is that so?
While making an offer, the other person should say I accept or reject. When the other person makes a counter offer (to that), then it means our offer is not acceptable.
Instead, we should understand the issues better. We gave a considered offer.
Who made the offer?
The investment banker was talking to both of us. Our views (and) calculation was explained to the banker who (had to) explain to IDFC and take their input.
So his job was to see that both of us see advantages over a period of time and agree on something. So that process will go on.
Because we have not been able to reach an agreement before 31 October, it doesn’t mean we stop talking to each other.
Lall said that IDFC stands by its valuation. If Shriram is willing to stretch, then it will consider a deal.
Both of us should look at what we will get from this deal. If we have decided to work together, then we should work harmoniously.
The value (after a merger) is more than what we will individually achieve.
Were your shareholders already convinced?
Broadly, they were convinced on principle, not on details. Broadly, the thinking was that we have retail, they (IDFC) have a lot of capital and expertise in banking and together it will make a good deal.
But then you have to reduce (the proposition) to numbers. You have (to) reduce (it to) a concrete working plan.
What could have been achieved is more than what was originally conceived. That is what we should now be moving towards.
We are now developing a concept of working together and trying to see what can be achieved. This is the operating people’s responsibility.
But your shareholders are not happy with the valuation?
We have not talked about valuation. Our first job is to develop an understanding with IDFC. Only then can we share the share the advantages with our partners.
Our approach is logical and takes into account the interests of everybody
What were you doing for thee months?
It takes a long time to assemble the data, developing the concept of working together.
That exercise started only one to one and half months ago. Earlier, IDFC was doing something with McKinsey.
We believe in making our people understand what they can achieve. We haven’t completed the argument and not communicated the vision to them. They (IDFC) are only going by the numbers.
IDFC says they will look at merging with other non-banking finance company or even a bank.
We don’t have many options. We have very limited options. This is good. We had quite a few before, but not interesting enough. But this was interesting so we are pursuing.
In the meantime, if IDFC has some other option, they will go ahead. We are not desperately dependent on any deal with anyone.
What could have saved the deal?
There was no deal in the first place. Supposing we had agreed, then we could have said the deal was being called off. Discussions are only coming to an end.
How much time are you willing to give?
We are waiting for our people to complete the job; we are waiting for information. By then, IDFC should be in a mood to discuss.