Equity Investments

Shriram Cap plans fresh equity issue, strategic stake sale

The Shriram Group has revived its fund-raising plans and is looking at bringing on board strategic or financial investors in Shriram Capital, the unlisted, flagship holding company.

The proposed fund-raising by the Chennai-based financial conglomerate, through share sales by existing investors and a fresh equity issue, could result in transactions valued at as much as $2 billion (Rs 15,000 crore), two people familiar with the development told ET.

Shriram Capital is owned by Ajay Piramal-controlled Piramal Enterprises, TPG, South Africa-based Sanlam Group and the Shriram Ownership Trust.

Fund-raising efforts are likely to be facilitated by R Thyagarajan, founder of Shriram Group, known as RT among employees. The company may offer equity to a clutch of long-term investors, such as sovereign funds, instead of divesting to individual investor groups.

The share-sale exercise may run parallel to an ongoing restructuring exercise that investors – both within and outside – have sought.

“The proposed merger of Shriram Capital with other group entities or a standalone listing will now depend on the new investor or group of investors that will join the group,” one person said.

After an unsuccessful attempt to merge the group with IDFC last year, shareholders of Shriram Capital began exploring the possibility of combining it with Shriram Transport Finance Company and Shriram City Union, which would have resulted in an automatic listing. Shriram Transport Finance is a listed company.

However, a merger along those lines could have resulted in the Piramal group, which has stakes in all three companies, holding about 27 per cent of shareholding in the combined entity and triggering an open offer. This would have forced the Piramal group to spend an additional Rs 10,000 crore to buy a 26 per cent stake from existing investors.

“Merger with the group and inviting investors will continue to be looked at, as in the past. There is no feeling of urgency to bring new investors into Shriram Capital,” Thyagarajan said.

“Capital is the engine of growth for any financial services player. We are constantly evaluating opportunities to augment business growth,” a Piramal Enterprises spokesperson said in an emailed reply to ET queries, attributing the statement to Shriram Capital.

A merger aimed at listing Shriram Capital would have given an exit option to long-term shareholders of the company. Piramal Enterprises acquired about 20 per cent stake in the company in 2012.

TPG has owned about 9 per cent in Shriram Capital since 2012. Sanlam Group has about 23 per cent and the Shriram Ownership Trust has 48 per cent.

“No proposal for merger of Shriram Capital with group companies was dropped due to hurdles in achieving objectives of enhancing synergy. In Shriram, synergy creation is a continuous and ongoing process,” Thyagarajan said.

Piramal had acquired 10 per cent each in Shriram Transport Finance and Shriram City Union, with its investment in the group at Rs 4,800 crore.

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