IDFC and Shriram Group are working on various alternative structures to try and ensure that their proposed merger goes through, Ajay Piramal, chairman, Piramal Enterprises, said in an interview.
ET reported on Wednesday that IDFC Ltd and Shriram Capital had decided to work on a new formula to salvage the plan amid shareholder resistance and fears over dilution of holdings.
“There are many structures which were being worked upon from day one. We have said that it will depend on what RBI says and it will depend on what the valuations are,” said Piramal, also chairman of Shriram Capital. “So, there are many permutations and combinations which go on.”
ET had reported that the merger terms were being redone as shareholders and managements sparred over valuations.
Piramal said the merger formula being worked on will make sure that the interest of shareholders is safeguarded. “Shriram will not do anything which is not in the interest of its shareholders,” he said.
“We will protect the interest of Shriram shareholders as long as I am there and we will protect the interest of PEL (Piramal Enterprises Ltd) shareholders because it has a large share. So, whatever combination, if it takes place, will only be in the overall interest of all the shareholders.”
He also declined to comment on whether the 90-day exclusivity contract will be extended from its current October 6 end date. “We will see, there is still time,” he said. Shriram and IDFC entered into a 90-day exclusivity arrangement on July 9 to consider a potential merger.
ET had also reported that the two companies may extend the exclusive-negotiation period as they rework their proposal that looks to create one of the biggest private banks in the country.
The proposed deal involved the merger of Shriram City Union with IDFC Bank, while Shriram Transport Finance would become a subsidiary of IDFC and likely be de-listed with the insurance businesses of Shriram Group becoming subsidiaries of IDFC.
ET had reported that Shriram Transport Finance would probably remain an independent listed entity since its absorption by IDFC would lead to shareholders getting a holding company valuation, which is usually at a discount.
In the second leg of the deal, unlisted Shriram Capital may be merged with IDFC, which is also a holding company. The combination of Shriram City Union Finance with IDFC Bank may progress as planned, people in the know had indicated.
IDFC Ltd fell 2.5 percent and IDFC Bank dropped 1.57 percent at the Wednesday close. Shriram Transport Finance rose 3.84 percent.
Source: Economic Times