Shriram Capital mulls merger of group firms to give Piramal, TPG an exit

Piramal Enterprises chairman Ajay Piramal. Photo: Mint

Shriram Capital Ltd., the holding company of Shriram Group of companies, plans to merge two of its largest subsidiaries — Shriram Trasport Finance Co. Ltd and Shriram City Union Finance Ltd. – with itself, aimed at providing an easy exit to investors Piramal Enterprises Ltd. and TPG Capital.

Three people familiar with this strategy of Shriram Capital confirmed this, adding that the plan entails creation of a simpler shareholding structure for Piramal Enterprises and TPG so that they are able to sell off their stakes.

“This deal will take a few more months as it will require necessary approvals for this merger to happen. Piramals were not looking at an exit until last year and now want to use the funds to strengthen balance sheet,” said R Thyagarajan, founder of Shriram Group.

Emails sent to Shriram Capital and Kotak Mahindra Capital Co went unanswered.

On Friday, Ajay Piramal, chairman Piramal Group, told Mint in an interview that group’s planned exit from Shiram Capital is on track.

Piramal bought a 20% stake in Shriram Capital in 2014 for Rs. 2,014 crore. Piramal holds 10% in Shriram City Union. Over the past few months, Piramal has been looking for a buyer for these stakes.

TPG Capital holds a 9% stake in Shriram Capital, while South Africa-based Sanlam Group owns 26% and Shriram Ownership Trust has a 45% stake in Shriram Capital.

If the deal goes through, the proceeds from the stake sale will be used by Piramal primarily to infuse capital into its lending businesses, repay debts of Piramal group’s promoter entities and provide capital for an organic growth.

Piramal had a 9.97% stake in Shriram Transport Finance but in June sold this stake for 2,300 crore.

The merger, if consummated, will result in an automatic listing of Shriram Capital since Shriram City Union and Shriram Transport both are listed entities.

Shriram Capital’s businesses include commercial vehicle finance (Shriram Trasport Finance Co. Ltd), consumer and enterprise finance (Shriram City Union Finance Ltd.), retail stock broking (Shriram Insight Share Brokers Ltd.), life insurance ( Shriram Life), general insurance (Shriram General Insurance), financial product distribution (Shriram Fortune Solutions Ltd.) and wealth advisory (Shriram Wealth Advisors).

On 30 August, a Piramal Group spokesperson had told Mint that since January Piramal has raised over 23,000 crores of long term funding through banks, financial institutions and external commercial borrowings. “Also, as previously stated we intend to bring in further equity of 8,000-10,000 crores into the financial services business, of which 2,500 crores has already been allocated. All of this will be more than sufficient to not only address all repayments but also to augment business growth in this financial year.”

This article was first published in livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.