Temasek Holdings will not buy TPG Stake in Shriram Transport Finance

MUMBAI: Singapore state investment fund Temasek Holdings has decided to drop its plans to buy private equity major TPG Capital's stake in India's largest commercial vehicle financing company Shriram Transport Finance , two people familiar with the matter told ET.

"Temasek, after evaluating the company (Shriram Transport), has taken a call not to go ahead with the stake buy," said a person with direct knowledge of the deal. Shriram Transport and TPG were not available for comment.

Temasek's decision comes in the wake of the Reserve Bank of India's move to take away priority sector lending status for nonbanking finance companies. The removal of priority lending status is likely to increase cost of funds for NBFCs and dent net interest margin.

Priority lending enabled NBFCs to get fund from banks at a discount to market rates. NBFCs borrowed more than 50% from banks in 2010-11 compared with just 14% in 2009-10 . In the past one year, the central bank has taken various measures to tighten regulations for NBFCs to bring them at par with regular banks.

TPG, which holds 20% stake valued at Rs 3,000 crore in Shriram Transport, was in talks with Temasek to offload part of its holding . The PE major is also in talks with other sovereign wealth funds, including Government of Singapore Investment Corporation to sell its stake in the NBFC.

TPG wants to exit Shriram Transport and invest in other businesses of Shriram Group . It is planning to invest Rs 450 crore in Shriram Properties. It already owns 49% in Shriram Retail Private Holdings and 28% in Shriram City Union Finance.

Source: EconomicTimes