Shriram Group and IDFC Group have extended the confidentiality, exclusivity and standstill agreement by a month to evaluate the possible merger to create the one of the biggest private banks in the country.
The two parties will work on the share swap ratio, due diligence and other details with of the merger in the next 30 days.
In a filing to Bombay Stock Exchange, IDFC said that the board of directors of IDFC has entered into an agreement with Shriram Group to evaluate a potential combination of businesses of Shriram Group with IDFC Group.
Shriram and IDFC had entered into a 90 day exclusivity agreement on July 9 to consider a potential merger.
As per the proposed structure, all operating businesses of the two groups will come together under IDFC Ltd. The retail consumer centric business of the holding company 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 Limited. Shriram Life and Shriram General Insurance will also become subsidiaries of IDFC.
Rajiv Lall MD and CEO IDFC Bank while announcing the deal had said that it is a complex transaction and it will take time to execute.
“Shriram Transport Finance is likely to be delisted post the proposed deal,” said Jefferies in a report. “We believe merger ratio may need to be favorable for SHTF’s shareholders as their exposure to niche used CV business may fall and effective exposure to other unrelated businesses could rise, SHTF may represent 40% of loan book and 50% of profits on a proforma basis.”
Shares of IDFC fell 0.25% to Rs 58.95 while IDFC Bank rose 0.89% to Rs 56.65. Shriram City Union rose 1.94% to Rs 2,083.45 and Shriram Transport Finance was up 0.65% to Rs 1,056 on the Bombay Stock Exchange.
Source: Economic Times