IDFC-Shriram Group Merger Is Said to Be Called Off as Talks Fail

  • Some IDFC shareholders weren’t happy with proposed valuation
  • IDFC board to meet Monday to discuss results, merger

The proposed merger between IDFC Group and Shriram Group will be called off as talks between the two parties have failed, people with knowledge of the matter said.

Some shareholders of IDFC Ltd. were not happy with the valuation proposed, the people said, asking not to be identified because the details are private. The IDFC board will meet Monday to discuss second-quarter results as well as the merger, the people said.

A deal to combine Shriram Capital and the group would have created a financial conglomerate with a universal bank and the ability to provide a range of financial products from insurance to vehicle finance. Under the plans laid out earlier, Shriram City Union Finance Ltd. would have been merged into IDFC Bank Ltd., while Shriram Transport Finance Co. would have remained a standalone unit of IDFC.

The life and general insurance units of Shriram Group were to become units of IDFC, IDFC Bank Chief Executive Officer Rajiv Lall said in July.

The Indian government is IDFC’s biggest shareholder with a 16.4 percent stake, while a unit of Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. holds 9.5 percent, according to exchange filings. The biggest shareholders of IDFC Bank -- other than IDFC, which owns a 52.8 percent stake -- are the Indian government with a 7.7 percent stake and the Khazanah unit with 4.4 percent.

Valuation

The unlisted Shriram Capital, the holding company of Shriram Group, was being valued at around 250 billion rupees ($3.8 billion) for the proposed deal, the people said. IDFC, which has a market value of about 100 billion rupees, was being valued at about 130 billion rupees, the people said.

The Economic Times reported the status of the merger earlier Monday, citing unidentified people. Representatives for Shriram Group didn’t immediately respond to requests for comment, while a representative for IDFC Group couldn’t immediately comment.

IDFC won a preliminary permit for its banking unit in 2014, and the lender has been publicly traded since November 2015.

Piramal Enterprises Ltd. bought a 20 percent stake in Shriram Capital in 2014. The firm backed by billionaire Ajay Piramal also has stakes in Shriram Transport Finance and Shriram City Union Finance, the publicly traded units of Shriram Capital.

IDFC and Shriram on Oct. 5 extended an exclusivity pact for the proposed deal to Nov. 8, citing “the extensive due diligence process involved in the ongoing discussions,” according to stock exchange filings.

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