M&A Critique
Shriram Group

Shriram Group Is The First Choice For Investors

Shri Ram Group Company has made investments in Manufacturing, Value Added Services, Project Development, Engineering Services, Pharmaceuticals, Machined & Auto Components, Press Dies & Sheet Metal Stamping, Packaging, Information Technology, Property Development etc.

Business Structure of Shriram Group:

The 30,000-crore Shriram Group had its humble beginnings in the Chit Fund business over three decades ago. R Thyagarajan, AVS Raja, and T Jayaraman were the “three Founders” who ventured into these businesses. The operations are split into 16 regions.

Shriram’s goldmine In order to further understand the Shriram Group’s allure, it is worth reviewing its sprawl of businesses. The major parts of PE investments are in the Group’s finance businesses—of which Shriram Capital is the holding company—and include STFC, Shriram City Union Finance Ltd (SCUF) and Shriram Retail.  In the past 8 years, 16 PE funds invested $675 million in the Shriram group companies; the group is valued at about $1.07 billion (around Rs 6,000 crore) at present.

Shriram Capital is the undisputed destination of choice for private equity players in India

Deal Monster Major investments made in Shriram Group since 2004

STFC lends money to truck owners while SCUF is a retail finance company which has also made forays into housing financing, by floating a new subsidiary. The Group also has two insurance companies, Shriram Life Insurance Company Ltd and Shriram General Insurance Ltd, as well as Shriram Fortune Solutions, Shriram Insight Share Brokers, and Shriram Wealth Advisors. Other properties include a non-finance business, Shriram EPC, which provides end-to-end solutions to engineering, construction and project management services.

Shri Ram Transport Finance Company, Ltd.is the flagship company of the Shriram Group. In April 2013, Sanlam Emerging Markets Ppty Ltd, a unit of Sanlam Ltd Sanlam Life Insurance Ltd, raised its stake to 10% from 6.3%, by acquiring a 3.7% stake in the Company. In May 2013, Piramal Enterprises Ltd acquired a 10% stake in Shriram Transport Finance Co Ltd.

In general, industry insiders say that the Group functions in a niche area which gives them good volumes, higher and superior yield It’s been able to get into areas which banks and other financial institutions have been wary of, such as financing for small truck owners.

Fat Returns-(Financial Aspect)

Ultimately Shri Ram Group unusual traits have manifested themselves into handsome returns for their investors. In 2005, Chrys Capital invested Rs 100 -120 Cr in STFC and existed in 2009 for cool returns of Rs.1400 Cr, 11 to 12 times what they put in.

U.S. private-equity firm TPG Capital sold a 10% stake in India’s Shriram Transport Finance Co.  for $307 million, making nearly a five-fold return on its investment. With the sale, to Indian health-care firm Piramal Enterprises, TPG has almost fully exited its investment in Chennai-based Shriram Transport, which gives small-ticket loans to truck drivers and small businesses. In February, TPG had sold another 10% in the Indian company. TPG’s Newbridge India Investments II Ltd. had in 2006 bought a 49% stake in Shriram’s parent, Shriram Holdings (Madras) Pvt., according to a stock exchange filing in 2009. After a merger between the parent holding company and Shriram Transport in 2012, TPG’s stake in the company stood at 20.28%. TPG had bought Shriram shares at 112 rupees a share, according to a TPG spokesman. The sale was for 723 rupees, according to Piramal.

Substantial Acquisition of Shares and Takeovers in 2013:

Company Name of Acquirer / Seller Acquisition/Sale
SHRIRAM TRANSPORT FINANCE CO.LTD. Newbridge India Investments II Ltd Market
SHRIRAM TRANSPORT FINANCE CO.LTD. Piramal Enterprises Ltd Market

Comparison with Peer Group

Particulars’ Shri Ram Transport Power Finance IDFC Muthoot Finance
EPS 59.98 23.41 11.66 27.02
CEPS 60.78 23.01 11.83 28.24
P/E 13.71 8.33 13.31 5.38
Price 823.30 195.05 155.30 145.40

(Source BSE As on 28th May 2013) .The earning per share and Cash earnings per share of Shri Ram Transport are highest among all its Peer Group.

Increase In Business – Shriram Group, which has the presence in consumer finance, commercial vehicle lending, insurance, and retail stock broking and real estate is planning to set up will set up a new company to apply for a banking license. All its financial service companies will come under this new holding company.

  • It is proposed is to have a new entity under Shriram Capital that will apply for banking license, “All the financial services businesses, including the bank, will be under this company.”Shriram Capital is the holding company of the group’s financial services business including Shriram Transport Finance, Shriram City Union Finance and the life and non-life insurance. (Source- Hindustan Times). Most of the customers  are middle-class and lower middle-class people If given the license, most of the business will come from people living in semi-urban and rural areas.
  • Shri Ram Group has shown an interest in buying HSBC‘s 26 percent stake in the Canara HSBC OBC Life Insurance Company. Acquiring a stake in Canara HSBC OBC Life Insurance will be a good bet for the Shriram Group to open the bancassurance channel. The two public sector banks together own around 5,500 branches across the country, which will be a major route to grow the business. The Group sees value in the number of branches.(Source Business Standard)

Management Capability –Sometimes, the type of people employed by the company—and how many years they’ve logged there can often be a good indicator of the kind of company it is. The company has also managed its asset quality well despite a challenging economic environment. Healthy asset quality (due to established track records of customers sourced from the group).The Company has high profile recruitment which has helped the Company to grow. They follow cost-conscious approach and have a frugal Management Policy; the low cost has sustained the Customer Base of the company.

Promoters holding is low it has come down to 25.73(March 2013) % to 45.64(March 2012) yet people are investing in the group to enjoy the benefits of increase return and investing in PE.


The company with the clear business case with a capable and transparent management, getting funds will not be a hurdle in its growth. Once credentials are established and scalability is visible, there will be investors at every stage. So as rightly said if promoters concentrate on their core competencies, there will be definitely enough opportunities to get required growth capital at the right price


M & A Critique