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Shriram Group cos’ merger to create value for shareholders: Ajay Piramal

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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 firm.

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.

“That is all I can say.

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 itself.

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.




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