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Analyst Meet / AGM
10-Jul-17
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Conference Call
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IDFC
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Entire merger process could take one year to complete
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IDFC Group and Shriram Group have announced entering into a confidentiality, exclusivity and standstill agreement to evaluate a strategic merger. The company held a concall on 10 July 2017 to discuss the development, which was addressed by Sunil Kakar, Group CFO:
Highlights:
- IDFC Group and Shriram Group have entered into 90 days exclusivity arrangement to decide the possibility of merger of both the group under. No transaction has yet been finalized as yet, while the company would be undertaking due diligence and discussions for merger over next 90 days.
- As per the deal, all the operating businesses of the respective groups will come together under the flagship group - IDFC.
- The retail consumer centric business of Shriram capital namely Shriram City Union Finance will absorbed into the bank.
- The transport finance business of Shriram Capital namely STFC will remain a standalone NBFC that would become a 100% subsidiary of IDFC.
- The life and general insurance businesses will also become subsidiaries of IDFC.
- As per the company, the major objective of the merger is to create a financial conglomerate with a mass retail universal bank at its core.
- All operating businesses of the merged entity will be co-branded, with the Shriram brand being very strong in the retail lending space.
- For IDFC Bank, there are significant value accretions in terms of strong acquisition of retail assets with the merger of Shriram City Union Finance, which is a high RoE lending business and has strong presence and touch points across India.
- IDFC would acquire 100% stake in Shriram Transport Finance and profitable general insurance business as well as dividend-paying life insurance business.
- The Shriram Group is a well-capitalised and a strong retail brand.
- As per the company, the entire merger process could take one year to complete.
- There are various complementarities from the merger. IDFC is focused on technology with significant investments made so far. The technological expertise will be disseminated to Shriram. The both goups also complement at the management level as more talent available on merger.
- The company expects Piramal Group to remain a minority shareholder and a significant investor in the merged entity.
- The merger of Shriram Transport finance with IDFC Bank is avoided as it would have led to dilution of IDFC into IDFC Bank below 40% against the regulatory guidelines.
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