Shriram, IDFC extend CES pact

IDFC Ltd. and the Shriram Group have decided to give themselves more time to evaluate a potential merger of some of their businesses.

They have now agreed to extend the CES (confidentiality, exclusive and standstill) pact up to November 8.

The time-limit extension to study a potential combination comes even as reports have indicated that the exercise is facing intense resistance from a section of the stakeholders from both IDFC and the Shriram Group.

They had announced on July 8 their decision to explore merger options. The CES pact provided for mutually agreed 90-day exclusivity period for evaluating the proposed deal. “Given the extensive due diligence process involved and the on-going discussions, the parties have agreed for extension of the CES agreement up to November 8,’’ an IDFC filing with the BSE said.

The July 8 plan had envisaged the merger of Shriram City Union Finance with IDFC Bank. It had also envisaged the de-listing of Shriram Transport Finance Company and making it a subsidiary of IDFC Ltd — the parent of IDFC Bank. Under the plan, IDFC will be the group holding company that will also own shares of Shriram’s insurance ventures.

Some have apprehended that the move could result in a sharp dilution in IDFC Ltd. and IDFC Bank. Also, an influential section of the shareholders of Shriram Transport is not enthused over the prospect of suffering ‘holding company discount.’ All these have sort of put a brake on the discussion process. The time-limit extension, sources said, could see both coming out with a fresh set of solutions that are comfortable to all stakeholders.