IDFC, Shriram call off merger

‘IDFC investors sought ₹40 premium per share to which Shriram did not agree’

The IDFC Group has called off its merger 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. Rajiv Lall, MD & CEO, IDFC Bank, told

The Hindu that shareholders of IDFC had provided valuable inputs for the merger to take place. However, when IDFC proposed the terms of the merger to Shriram Capital, the latter didn’t respond, he said.

Lack of consensus?

“Shriram never got back to our proposal, which we could take to our board for further discussions,” Mr. Lall said. “They did not come back, presumably because they did not think they would be able to get consensus around a price that would be acceptable to us.” IDFC Bank would continue to look at organic and inorganic possibilities, he said.

Sources said IDFC shareholders were asking for ‘at least ₹40 premium per share’ for their holding in IDFC Ltd. which was not agreeable to the management of the Shriram Group. IDFC Ltd. shares lost 2.7% to close at ₹61.70 while IDFC Bank’s shares declined 1.76% on the bourses at ₹55.95.

On July 8, IDFC and Shriram Groups entered into exclusive talks for a merger. It was proposed that Shriram Transport Finance, the flagship company of the Shriram Group which manages assets worth ₹80,000 crore, will become a subsidiary of IDFC and Shriram City Union Finance will be merged with IDFC Bank.

The insurance ventures of Shriram Group were supposed to be a part of IDFC Ltd. The combined entity would have been called IDFC-Shriram Bank. The 90-day exclusive period for talks ended in October following which it was further extended by a month. The deal had was aimed at taking advantage of the complementarity, as IDFC Bank started as a wholesale lender while Shriram was retail-focused.

IDFC Group would have gained from one crore customers of Shriram. Shriram Transport was also envisaged as thought of acting as a business correspondent of IDFC Bank which would have garnered deposits. The merger was aimed at increasing the profitability of the bank as it would have gained retail assets.