As per the news reports, a merger between the unlisted Shriram Capital (SC) and the listed arms – Shriram Transport Finance Company (STFC) and Shriram City Union Finance (SCUF) may be announced soon.
Key points to note –
- The proposed merger of the three entities is targeted towards group consolidation of NBFC business under one umbrella and reverse merging of the holding company (SC) into it’s step down investments (STFC and SCUF).
- SC is the principal holding company/Promoter for the Shriram group’s financial services businesses. As on March 31, 2021, Shriram Ownership Trust and Shriwell Trust (not part of Promoter/Promoter group) held stake of 29.7% and 13.2% respectively of SC and the balance being held by Sanlam group (26%), the Piramal group (20%), the TPG Capital group (9.4%) and individuals (1.7%).
- Reverse merger would allow the investor shareholders of SC e.g., Piramal group, private equity firm TPG Capital etc to get an exit.
- SC held 25.58% in STFC and 33.86% in SCUF as on September 30, 2021.
- The proposed mergers have been in works for almost three years now and finally it seems that the group is getting closer to conclude it.
- ICICI Securities and Morgan Stanley are rumoured to be advising on it. Two years back, Kotak Mahindra Capital’s name was also rumoured.
The proposed merger has been a long hanging uncertainty for the group’s listed entities. Hopefully, it should now be concluded soon so that the group’s management can have greater focus on the business !
Shriram Group on November 30, 2021 announced the creation of a board of management to drive the long-term vision of the conglomerate. The management board which included four senior group executives will oversee promoter interest and will be mentored by founder R Thyagarajan.
As per the succession plan, the promoters stake in the Shriram Group, will be owned by its current and future leaders. The Shriram Ownership Trust, a private discretionary body was set up in 2006 to provide opportunity for the current and future leadership of the group to be beneficiaries of the Trust.
These beneficiaries will be responsible for the management of the Shriram Group. The board of the trust will constantly evaluates the performance of its leadership team and keep inducting additional members into the Trust to ensure the perpetuity of ownership and leadership.
Further details can be referred here.
https://economictimes.indiatimes.com/news/company/corporate-trends/shriram-group-announces-succession-plan-creates-management-board-of-senior-executives/articleshow/88005817.cms
The merger has been finally announced on December 13, 2021
Key points to note –
https://www.bseindia.com/xml-data/corpfiling/AttachLive/fdc20ffb-4c20-4bc2-a08f-5d64db0e3530.pdf
Bankers and proxy firms are not happy about the swap ratios and fall in promoter’s share.
Main reasons –
In my personal view, all three can be considered as valid but very little other option.
Strategic investors needed an exit and merger was one of the better option due to lack of liquidity at the holding level. Selling to anyone else would have meant lower valuations for them due to holding company discount. All the three concerns are related to each other and make theoretical sense but instead of having a deadlock, it was better to settle it out and move on.
There is always pros and cons of every strategic decision.
As a shareholder, if you believe the business makes sense – hold on. Else there is always an option to sell out.
https://www.livemint.com/companies/news/proposed-merger-may-hit-valuations-of-shriram-group-cos-11639679133235.html
KKR is buying 9.99% stake in Shriram General Insurance (SGI) for Rs 1,800 cr valuing the business at Rs 18,000 cr.
Post receipt of all the approvals, November 30, 2022 has been fixed as the record date for the purpose of share swap.
Shriram Transport Finance and Shriram City Union Finance are now Shriram Finance
https://www.bseindia.com/xml-data/corpfiling/AttachLive/6272A47A-D750-4B92-AF68-1013A5E46EEA-121056.pdf