IDFC-Shriram merger unlikely by early October

Discussions on valuations were ongoing still and sources say there might be some tweaking in the tentative plan presented in July

The chances of a definite deal emerging from the merger talks between the IDFC and Shriram group by early October appear dim, as the 90-day window for negotiations draws to a close.

Without committing on the outcome of the talks, Ajay Piramal, chairman of Shriram Capital and Primal Enterprises, said: “We will explore ways to see if the merger works out on the basis of what the Reserve Bank of India (RBI) approves and what the valuations are. We are still looking into it." 

On July 8, IDFC and the Chennai-based Shriram group had entered into a 90-day merger talk. Under the tentative arrangement, IDFC would be the holding company of the merged entity. Shriram Capital’s retail lending arm Shriram City Union Finance would be merged with IDFC Bank, while the Shriram Transport Finance would be a fully-owned subsidiary of IDFC. IDFC would own 75 per cent of the life and general insurance arm of Shriram Capital.

As per the proposed deal, the mutual fund arm of IDFC would be integrated with Shriram Asset Management, following which the entity would get listed.

Piramal, after launching the Piramal Housing Finance company, said: “It is all about the opposition of shareholders. We (Piramal) are the largest shareholders in Shriram and we will not do anything that is not in the interest of shareholders. We have a vested interest to see that but even otherwise, as a group, Piramal stood by to see that all shareholders get the most appropriate deal.”

Banking sources said discussions on valuations were still on, and some tweaking in the tentative plan presented in July was possible.