IDFC Bank and Shriram Capital to Amalgamate as Single Entity

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IDFC and Shriram are planning to merge their various businesses so as create a powerhouse of ₹ 60,000 crores. The truck financing subsidiary Shriram Transport Finance and consumer lending unit Shriram City Union Finance, the two lending companies of the holding group Shriram Capital are proposed to merge with IDFC Bank. This merger is assumed to take time whereas, the amalgamation of unlisted life insurance and general insurance companies with the IDFC is to be taken on priority. The proposal will be discussed in the meeting on Saturday, July 8. The negotiations talks to proceed between the two entities will stretch for the period of 90-120 days.

After the merger, both Shriram Capital and the BSE- listed IDFC will be the holding companies of the newly formed entity. If this merger turns in favour, it will grant liquidity to Piramal Enterprises 2014 investment of ₹ 2,014 crores for a 20% stake in the unlisted Shriram Capital. Post merger the Piramal Enterprise’s stake will limit up to 10% in the new entity as per the Reserve Bank of India’s norm on corporates owning stakes in banks.

Company Name IDFC Bank

(Amount in ₹ Crores)

(Amount in ₹ Crores)
Shriram Transport Finance

(Amount in ₹ Crores)
Shriram Citi Union Finance

(Amount in ₹ Crores)
Total Income9,546 10,46810,9044,709
Net Interest Income2,0172,1315,530-
Net Profit 1,0206991,266578
Net Worth14,67810,82011,3325,188
Market Cap21,5459,67125,13616,619
Price (per share)63.460.61,107.92,520.0

The union with Shriram Capital will give assistance to IDFC Group to fulfill its financial inclusion targets and expand its retail portfolio. The Bank’s loan portfolio mostly includes of business and infrastructure credits. Due to the problem in infrastructure division and rapid corporate credit requirement, the Bank has been waiting for the retail and SME segments to enhance the business.

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As per the statement given by both the groups, if the output of the meeting is productive the information will be given to stock exchanges. The stock prices of all the companies involved were positively affected after the merger talks. The shares of Piramal Enterprises raised by 4.5% to ₹ 2,938 per share and the market capitalisation range over ₹ 50,000 crores. Also, the share price of IDFC company reached ₹60 per share and IDFC Bank’s share increased by 1.7%. For the Shriram Group Companies, the Shriram Transport Finance Company stock reported a hike of 1.2%, while City Union Finance Company stock deduced by 1%.

This union will benefit both the groups and the entity would get the position among the top financial services firms of the country by making it a ₹ 60,000 crores plus entity.