shriram transport finance: Post merger of lending units, Shriram to be among top five NBFCs: Shweta Daptardar

Post merger of lending units, Shriram to be among top five NBFCs: Shweta Daptardar

14 Dec , 2021 By : monika singh

The biggest positive of the merger with Shriram City Union would be for Shriram Transport Finance NSE -6.41 % shareholders as the company will be transitioning into a diversified NBFC. This is going to reduce the cyclicality for the vehicle finance business," says Shweta Daptardar, Research Analyst, Prabhudas Lilladher.

How are you analysing the merger ratio that has been announced– 100 Shriram City Union shares for 150 Shriram Transport?

It removes the huge overhang on this talk which was going around for quite some time and this is very much on anticipated lines, especially when the company had put a succession plan in place very recently. So the restructuring was on the cards. The biggest positive which comes out of this merger would be for the Shriram Transport Finance shareholders as the company will be transitioning into a diversified NBFC. This is going to reduce the cyclicality for the vehicle finance business where more than 20% of the AUM comes from commercial vehicles.

So, it is a big positive in terms of removing the overhang and also reducing the cyclicality of the business for Shriram Transport Finance shareholders.

Under the scheme, two listed companies – Shriram Transport Finance and Shriram City Union Finance – get merged. Shriram Capital owns almost one-fourth of the shareholding in Shriram Transport Finance. So once the merger between the two listed companies take place, Shriram Capital is likely to get into the new combined listed entity and back of the envelope calculation shows that given that the merged lending entity will have more than almost 1.5 trillion of AUM, it should be amongst the top five to six NBFCs in the country.

The Shriram Ownership Trust and Shriwell Trust together own almost 43% in Shriram Capital which is unlisted. So there will be streamlining of the structure and we will get a behemoth of an NBFC which will be diversified across portfolios.