Shriram City sells 10% stake to Piramal Enterprises for Rs789.58 crore  

Mumbai: Shriram City Union Finance Ltd on Wednesday sold nearly a 10% stake to Piramal Enterprises Ltd for Rs789.58 crore, taking the latter’s total investment in Shriram Group to around 30%.

In a late evening statement, Shriram City Union, a unit of Shriram Group, said it approved the issue of about 6.6 million equity shares to Piramal Enterprises for cash on a preferential basis at a price of Rs1,200 each, including a premium of Rs1,190 a share, aggregating to Rs789.58 crore.

Shriram City’s board decided to convene an extraordinary general meeting on 30 May to obtain the approval of shareholders.

UBS Investment Bank acted as the sole placement adviser to Shriram City for the transaction.

Shriram City is a retail financier, and was managing assets worth Rs.15,800 crore as of March 2013.

The company offers loans to small businesses and to buy two-wheelers, commercial vehicles, passenger vehicles, consumer durables and homes. It also offers loans against gold ornaments and for personal consumption.

On 17 April, Ajay Piramal’s Piramal Enterprises said it had agreed to acquire an effective 20% stake in Shriram Capital Ltd, an arm of the Chennai-based Shriram Group, for an aggregate consideration of Rs.2,014 crore, as it seeks to reinforce its presence in the financial services industry.

The latest transaction followed a Rs1,636 crore investment by Piramal last year to acquire a 9.9% stake in Shriram Transport Finance Co. Ltd, another affiliate of the Shriram Group.

With this latest transaction, Piramal Enterprises will have 30% stake in Shriram Group.

Piramal Enterprises is a strategic investor in the Shriram Group and the company is willing to stay longer, said G.S. Sundararajan, group director at the Shriram Group and managing director at Shriram City Union Finance, in a telephonic interview. “Now, we don’t need to hunt for capital. This investment enable us to continue with our existing business model and can enter into new line of businesses by way of acquisitions,” he said.

Sundrarajan added that Shriram Group was always looking for capital, which was hand-to-mouth for the group. “Piramal Enterprises is willing to invest upfront in anticipation of growth. This instills lot of confidence,” he added.

Mint could not immediately contact Ajay Piramal for a comment to this story.

The latest purchase helps Piramal Enterprises gain entry into the retail financial business, having focused so far on corporate debt and equity financing for realty, infrastructure and education projects.

The company, which sold its generic drugs business to Abbott Laboratories in 2010 for $3.72 billion and an 11% stake in Vodafone India Ltd for Rs.8,900 crore in April, is using some of that cash to chase its ambition of becoming a financial services powerhouse.

Its 20% stake in Shriram Group gives Piramal Enterprises a presence in all financial services areas including vehicle financing, general and life insurance, consumer and gold loans, and brokerage and mutual funds.

 

Gauri Kesarwani.

PGDM- 2ns sem

Source: Live mint