INSUBCONTINENT EXCLUSIVE:
A three-way merger of all lending and insurance businesses in the Shriram Group would help simplify the conglomerate’s ownership
structure, making it sufficiently attractive for potential investors to consider buying Ajay Piramal’s stake and give the billionaire an
exit route that is mutually beneficial to both sets of shareholders.
“We are looking to see how we can create value for both Piramal
shareholders and Shriram shareholders,” said Ajay Piramal, chairman of Piramal Enterprises
“One of the steps we are taking is to see whether all entities of the Shriram Group, in financial services, can be merged… Therefore,
lending activities and insurance activities could be merged along with the holding company, which is Shriram Capital.”
The proposed merger
between Shriram Transport Finance and Shriram City Union would mean listing the holding company, Shriram Capital, as a financial services
That would give an exit opportunity to Piramal and private equity fund TPG — major investors in the Shriram Group.
Piramal owns 20 per
cent in Shriram Capital and 10 per cent each in Shriram City Union and Shriram Transport Finance
His investments in Shriram are worth about Rs 9,000 crore
He started buying into the Shriram Group, which has interests in lending, mortgages and insurance, in 2013 and made total investments of Rs
4,600 crore.
“Secondly, we are evaluating whether it makes sense — and value — for both Piramal and Shriram to finalise a possible
exit route,” said Piramal
If we find that there is the right counterparty on the other side and we get the right value, we could exit.”
Piramal also said that he
might buy loan portfolios of Dewan Housing Finance (DHFL), a nonbanking finance company (NBFC) into mortgage lending, instead of the company
After infrastructure financier ILFS defaulted on repayment commitments last year, NBFCs found it difficult to raise funds locally.
In the
fourth quarter ended March 31, Piramal Enterprises’ net profit dropped 88 per cent to Rs 456 crore from Rs 3,944 crore in the
corresponding period a year ago
Piramal reduced its wholesale lending ratio to 63 per cent from 83 per cent a year ago
Overall revenue climbed 23 per cent in the quarter.
Piramal Enterprises raised Rs 16,500 crore in the second half of the financial year
The company is seeking to restrict the share of commercial papers in its FY20 borrowing target to 10 per cent.
On listing the financial
services company, Piramal said that retaining the less-risky pharma business with finance worked better during difficult business cycles
“Having said that, we continue to maintain that in the medium term, we will separate it out,” said Piramal.
Shares of Piramal
Enterprises fell 5.7 per cent to Rs 2,409.65 apiece on the BSE.
