Icon times
The merger of Shriram Transport and Shriram City Union- What Should Shareholders Do?

The merger of Shriram Transport and Shriram City Union- What Should Shareholders Do?

Published on 30 December 2021 Views 73 Comments 0

Shriram Group announced the restructuring plan of its financial services businesses- Shriram Transport Finance Limited and Shriram City Union Finance Limited on Monday 14th December 2021. Let’s discuss more about this corporate announcement and know what should shareholders do post this merger of the 2 Financial Services arms of Shriram Group.

Restructuring of Financial Services Business of Shriram Group:

  • This restructuring of the Financial Services Business of Shriram Group which was announced on 14th December 2021 will lead to the creation of India’s largest retail finance non-banking financial company (NBFC) with the merger of Shriram City Union Finance Limited and Shriram Transport Finance Limited.
  • Currently (as of 13/12/2021) Shriram Capital Limited (SCL) is the holding company of Shriram Transport and Shriram City Union where it owns 26.04% and 33.86% stake respectively. This will result in the exits of Ajay Piramal-led Piramal Group and TPG from Shriram Capital.

Shriram Group-Existing Corporate Structure

Shriram Group-Existing Corporate Structure

  • Now, this holding company, as well as the 2 subsidiaries company, will be merged and all together will be formed a new company named Shriram Finance.
  • Further, Shriram Transport owns a subsidiary company i.e., Shriram Automall, where it owns 44.56% stake, while Shriram City Union also has one subsidiary named Shriram Housing, in which it holds an 85.02% stake. Post the merger, these 2 subsidiaries- Shriram Automall and Shriram Housing will remain the subsidiary companies of Shriram Finance.
  • Now a new company (merged) will be formed as ‘Shriram Finance’ where the promoter holding will be 20%, where there are 2 companies- Shriram Ownership Trust and Shriram Financial Ventures Private Limited (SFVPL). These 2 promoter companies will own 1.88% and 18.23% stakes respectively, while the rest 79.89% will be owned by other Public Shareholders.

Shriram Group- Resultant Corporate Structure Post Restructuring

Shriram Group- Resultant Corporate Structure Post Restructuring

Shriram Group Restructuring- Swap Ratio:

  • If an investor is holding 1 share of Shriram City Union, he/she will be getting a 1.55 share of Shriram Transport Finance

Structure of Shriram Transport Finance:

Shriram Transport Finance AUM- Segment-wise Break up

Shriram Transport Finance AUM- Segment-wise Break up

  • Shriram Transport Finance is majorly into the Vehicle Financing business.
  • As of September 30, 2021, Shriram Transport Finance is having an Asset Under Management of around Rs. 1.21 Lakh Cr. where Passenger Vehicles (PVs) loans comprise 20.4%, Heavy Commercial Vehicles & Construction Equipments (HCVs & CEs) of 47.98%, Medium & Light Commercial Vehicles (M&LCV) of 26.01%, and others (5.61%).
  • In terms of share of New Vehicle Finance and Used Vehicle Finance in the Total Vehicle Finance (96.8%) is 5.4% and 91.4% respectively.

Structure of Shriram City Union Finance:

Shriram City Union Finance AUM- Segment-wise Break up

Shriram City Union Finance AUM- Segment-wise Break up

  • As of September 30, 2021, Shriram City Union Finance is having an Asset Under Management of around Rs. 30,425 Cr. where Small Enterprise Finance loans comprise 47.3%, 2-Wheelers of 22.2%, Personal Loans of 9.3%, and others (21.2%).

Strong PAN-India presence of Shriram Finance:

  • Post-merger of Shriram Transport Finance and Shriram City Union Finance, the merged entity will have 2,796 branches. Currently, Shriram Transport is having 1,825 branches and Shriram City Union Finance is having 971 branches.

What Should Shareholders Do?

The merger of the financial services arm of the group is a sensible action by the Shriram Group, and hence existing investors can continue to be part of this stock as they are going to be a part of a bigger NBFC. And for the investors who are planning to invest in this stock, should closely observe this corporate event and track how things develop after this for the company and then should take decisions accordingly.

Originally Published On: https://blog.investyadnya.in/the-merger-of-shriram-transport-and-shriram-city-union-what-should-shareholders-do/

Attachments
File Name
private article suscription area icon

You like to know more. We like that!

Please subscribe Model Portfolio Plan to get access of all premium model portfolio articles Only at Rs 7499/Year.

Please login to view this free article.

This blog is available only for logged in users, please register and get access to view this article.

LATEST UPDATE

premium Premium
free Free
Read More

REPORTS


Corporate Action News

Chat on WhatsApp
Caret UP Arrow
InvestYadnya Support
Typically replies in minutes
InvestYadnya Support
Hi there
Welcome to InvestYadnya.
We are available to assist you on WhatsApp.
Please click on the button below to chat with us.
(10 AM to 7 PM IST)
16:10
Chat with InvestYadnya