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IDFC and the Shriram Group have agreed to finalise a merger of their financial services business in an attempt to create a financial supermarket with offerings from motorcycle credit to lending for multibillion-dollar power projects.
IDFC Bank CEO Rajiv Lall called the proposed merger a "marriage made in heaven" while founder chairman Deepak Parekh said that IDFC gets "readymade branches" and "hope the marriage happens" and the deal goes through amid likely regulatory obstacles. The two have agreed to hold exclusive talks and finalise the merger in 90 days.
All operating businesses of the two groups will come together under IDFC Ltd. The retail consumer centric business of Shriram Capital — Shriram City Union Finance — will be merged into IDFC Bank. The transport finance business will remain a standalone non-banking finance company that would become a subsidiary of IDFC Ltd. The share swap ratio and other details of the merger would be worked out in the next 90 says.
"In the long run, if ever there is a black swan event, you do need a fallback and that’s where a bank will help," said Ajay Piramal, the single largest individual shareholder in the Shriram Group.
The proposed merger will create a financial giant with a market value of at least Rs 72,000 crore that will have businesses like mutual funds and insurance. "It is a chance to create a financial conglomerate that could become India’s largest mass retail platform, to deliver full range of financial products," said Piramal.
The merger of the two group businesses may be the first of its kind in India with different businesses located in different companies. These companies straddle various regulators, from the RBI to SEBI.
An approval from RBI may be the trickiest one, with the central bank having expressed reservations in the past about the holding structure when it comes to banks. It had insisted all the lending businesses be brought under the bank umbrella for a universal bank licence.
"This is a complex transaction," said Lall. "Our expectation is that the whole transaction that is perceived as single scheme of amalgamation, will be approved only once by our boards, but it will take 12 months." "Shriram needs wholesale assets and IDFC needs retail assets," said Parekh. "There’s a lot of work ahead."
Source : Economic Times
IDFC Bank CEO Rajiv Lall called the proposed merger a "marriage made in heaven" while founder chairman Deepak Parekh said that IDFC gets "readymade branches" and "hope the marriage happens" and the deal goes through amid likely regulatory obstacles. The two have agreed to hold exclusive talks and finalise the merger in 90 days.
All operating businesses of the two groups will come together under IDFC Ltd. The retail consumer centric business of Shriram Capital — Shriram City Union Finance — will be merged into IDFC Bank. The transport finance business will remain a standalone non-banking finance company that would become a subsidiary of IDFC Ltd. The share swap ratio and other details of the merger would be worked out in the next 90 says.
"In the long run, if ever there is a black swan event, you do need a fallback and that’s where a bank will help," said Ajay Piramal, the single largest individual shareholder in the Shriram Group.
The proposed merger will create a financial giant with a market value of at least Rs 72,000 crore that will have businesses like mutual funds and insurance. "It is a chance to create a financial conglomerate that could become India’s largest mass retail platform, to deliver full range of financial products," said Piramal.
The merger of the two group businesses may be the first of its kind in India with different businesses located in different companies. These companies straddle various regulators, from the RBI to SEBI.
An approval from RBI may be the trickiest one, with the central bank having expressed reservations in the past about the holding structure when it comes to banks. It had insisted all the lending businesses be brought under the bank umbrella for a universal bank licence.
"This is a complex transaction," said Lall. "Our expectation is that the whole transaction that is perceived as single scheme of amalgamation, will be approved only once by our boards, but it will take 12 months." "Shriram needs wholesale assets and IDFC needs retail assets," said Parekh. "There’s a lot of work ahead."
Source : Economic Times
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