InvestorQ : What is the latest on the merger of the 3 Shriram group companies and is Shriram Capital worth buying at these prices?
Sam Eswaran made post

What is the latest on the merger of the 3 Shriram group companies and is Shriram Capital worth buying at these prices?

Answer
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swati Bakhda answered.
8 months ago


The recent update is that Shriram Capital has put off plans to merge with its other NBFC arms. The merger was questioned by RBI and it asked the group to cut its stake in its insurance business. It may be recollected that Ajay Piramal is one of the major investors in Shriram Capital apart from marquee names like TPG Capital. Due to the objections raised by the RBI, the proposed merger of Shriram Capital with its publicly traded companies; Shriram Transport Finance and Shriram City Union Finance. RBI was sceptical as the proposal would have effectively made the combined entity a large NBFC with a 77% stake in life and general insurance businesses.

RBI recommended non-bank financiers including Shriram to lower their holdings in insurance business to 50% or lower. RBI has been playing it safe after the NBFC crisis last year and does not want sensitive businesses like insurance to be impacted by the vagaries of the NBFC sector and its maturity mismatch issues. Shriram Capital has only shelved the project temporarily and has not given up on the proposed merger. It could still revive the proposal at a later date. The deal would have given TPG and Piramal an opportunity to exit from Shriram Capital, which looks unlikely for now. While Shriram Transport provides loans for new and pre-owned trucks, Shriram City Union lends to buy consumer goods and motorcycles.