The IDFC group has called off its merger deal with the Shriram group, over valuation, the former said on Monday .
"This is to inform you that despite best efforts, IDFC Group and Shriram Group have not been able to reach common ground on a mutually acceptable swap ratio for the merger,"" IDFC group said in a communication to the stock exchanges.
"Accordingly, both parties have agreed to call off discussions on a potential merger and the exclusivity period pursuant to the CES [Confidentiality, Exclusivity and Standstill] Agreement entered into between the concerned parties stands terminated with immediate effect,” it said.
At least Rs 40 premium per share
Sources said IDFC shareholders were asking at least Rs 40 premium per share for their holding in IDFC Ltd which was not agreeable to the Shriram management. IDFC Ltd shares ended the day at 61.70, down 2.7% than its previous close.
On 8 July, IDFC and Shriram groups entered into an exclusive talks for a merger and it was proposed, Shriram Transport Finance -- the flagship company of the Shriram group which manages assets worth Rs. 80,000 crore, will become a subsidiary of IDFC and Shriram City Union Finance will be merged with IDFC Bank. The insurance ventures of the Shriram were supposed to be a part of IDFC Ltd. The banking entity would have been called IDFC-Shriram Bank. The 90-day exclusive talk period ended in October following which it was further extended by a month.
The deal was aimed at sharing the complementary relationship since IDFC Bank started in operations (in Oct 2015) as wholesale lender while Shriram is a retail focused group. IDFC group would have gained from one crore customers of Shriram. Shriram Transport was also thought of acting as business correspondent of IDFC Bank, which would have to garner deposits. The merger was aimed to increase the profitability of the bank as it would have gained retail assets.
"From the bank's perspective, it is two things. One is to get retail assets so our immediate profitability improves and second is to gain the distribution reach and customers through which we can rapidly increase our deposits," Rajiv Lall, MD & CEO of IDFC Bank, had told The Hindu after the merger proposal was made.
Big blow for IDFC Bank
The development could come as a big blow for IDFC Bank which was aiming to ramp up its balancesheet quickly. IDFC Bank shares ended 1.76% down on the stock exchanges at Rs. 55.95
