Piramal Enterprises today said it will buy 20 per cent stake in Shriram Capital for Rs 2,014 crore, a move that will widen its play in the financial services space.
The Ajay Piramal-promoted company is hopeful that the deal will not lead to an open offer as half of the 20 per cent stake it is buying will come as fresh equity and the rest from existing shares of Shriram Ownership Trust, which owns 64 per cent in Shriram Capital.
The Piramal deal values the Chennai-based company at over Rs 10,070 crore.
"Buying of 20 per cent stake in Shriram Capital for Rs 2,014 crore is partly through fresh equity, which is half of it coming through fresh equity and and rest 10 per cent from Shriram Ownership Trust, which will sell 10 per cent of their stake to us," Piramal Group Chairman Ajay Piramal told reporters here.
Piramal had acquired 9.9 per cent stake in largest truck financier in the country Shriram Transport Finance, a Shriram Group company, for Rs 1,636 crore last May.
Shriram Capital is the holding company of Chennai-based Shriram Group, which controls Shriram Transport Finance and the retail lending NBFC Shriram City Union Finance.
The 40-year-old Shriram Group is into truck funding, consumer finance, insurance and asset management.
"We see lot of opportunities in financial sector space and feels that it is a good area to invest. Shriram Capital's operating units have over 9 million customers," Piramal said.
"Piramal's entry into Shriram Capital is a significant milestone for the financial services businesses to take a quantum leap in the group's contribution to the community at large," Shriram Group founder R Thyagarajan said.
Pirmal Enterprises is into realty, life sciences and healthcare. Piramal Healthcare in 2010 had sold its domestic formulations division to US drugs and nutrition multinational Abbott Laboratories for USD 3.72 billion.
Last week, Piramal Enterprises had sold its 11 per cent stake in telecom firm Vodafone Group plc for Rs 8,900 crore.
"This (new) investment builds our presence in the financial services sector and we see long-term shareholder value creation from our partnership with Shriram Capital," Piramal said.
The fresh stake buying will give us two board seats and there is a right of first refusal to buy out American PE fund TPG Capital which holds 10 per cent, or Sanlam Financial Services of South Africa, which owns 26 per cent in the company. But irrespective of this we are working towards seeing that how we can be really good and effective partners, Piramal said.
TPG had picked up the 10 per cent stake reportedly for Rs 4,500 crore seven years ago.
