Last Updated on Dec 14, 2021 by Aradhana Gotur

As part of restructuring the group, Shriram City Union Finance (SCUF) and Shriram Capital (SCL) will be merged with Shriram Transport Finance. The new ​entity will be named Shriram Finance. Following the news, Shriram City Union soared by ~11%.

What does the merger entail?

In accordance with the merger, Shriram Transport will issue 1.55 shares for each share of SCUF and 0.09783305 share for each share of SCL.

While the boards of the three companies have approved the merger, it is subject to the approval of the shareholders of the companies involved besides the regulatory bodies such as the RBI and National Housing Bank.

So far, Shriram Capital was the holding company for the Shriram group’s businesses. Based on September 2021 shareholding pattern, Shriram Capital holds a stake of 33.86% in Shriram City Union Finance and 25.56% in Shriram Transport Finance.

How would the merger help Shriram Group?

The merger would help bring all the group’s lending products under a single roof, making it a market leader in all its product and consumer segments. The products include two-wheeler loans, commercial vehicles loans, personal loans, gold loans, auto loans, and small enterprise finance.

The merger would also strengthen SCUF and STFC’s consumer-related products and offer a holistic product basket of all lending products. In addition, the merger would allow the group to cross-sell products of its insurance, broking, and AMC businesses.

Post-merger scenes

SCUF has an AUM of Rs. 35,000 cr. and a distribution network of over 950 branches. The merged entity would have a combined AUM of over Rs. 1,50,000 cr., customers of ~2 cr. served till date, and a distribution network of ~3,500 branches.

Shriram Finance will also add new products catering to retail and SME customers to its portfolio. Additionally, the company is looking to launch a super-app, which will host its existing and new lending products under the Shriram Finance name.

Ajay Piramal, Chairman of PEL, which holds a 9.96% stake in SCUF, said, “I am pleased to see the coming together of both lending businesses of Shriram. While they emerge as the largest retail finance NBFC, it also opens up immense opportunities for them with the synergies that transpire. It will be an exciting journey for the group as it creates the appropriate value proposition for the combined customer base of over 2 crores.”

Aradhana Gotur
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