Piramal exiting out of Shriram Finance

After TPG selling it’s entire 2.65% stake in Shriam Finance (SF), now Piramal Enterprises is selling it’s entire 8.34% stake in the Company.

• Stake is being offered through block deals to the institutional investors
• Realisation from stake sale is estimated at Rs 4,832 cr and the floor price for the sale is fixed at Rs 1,483/ share, which is at 5% discount to the previous day’s closing price.

Whether so many stake sales from SF is concerning?

SF’s business as such continues reasonably good and the stock at less than 10 trailing P/E is one of the cheapest in the sector.

Financial investors (like TPG) exiting from a Company is normally not a major concern. They have various compulsions.

Piramal planning to exit was widely expected and in fact was a major overhang on the stock.

Piramal’s stake history

Piramal had acquired a 10% stake in Shriram Transport Finance (now SF) in 2013 for Rs 1,636 cr and a year later acquired a 20% stake in Shriram Capital (merged into SF) for Rs 2,014 cr and a 10% stake in Shriram City Union Finance for Rs 790 cr (merged into SF).

In 2017, Shriram Group tried a merger between Shriram Capital and IDFC Bank, but the deal did not go through. Piramal Group then decided to hold on to the stake and was looking for opportunities to exit. Later in 2021, the company acquired the bankrupt firm Dewan Housing Finance Corporation by paying Rs 14,700 cr in cash to the lenders.

After the restructuring of the Shriram Group, Piramal Enterprises received shares in multiple Shriram Group companies, including 8.34% in SF and a 20% stake in each of the three holding companies: Shriram Gi Holdings, Shriram Li Holdings, and Shriram Investment Holdings.

In its annual report for 2023, Piramal said it has started the process to identify potential buyers for its associate investments: Shriram Li Holdings, Shriram Gi Holdings, and Shriram Investment Holdings.

Keeping everything in perspective, I would not read anything negative into the stake sale.