Shriram Group cos' shares fall on bourses

Chennai: A day after Shriram group announced merger of all finance businesses under one entity, the shares of Shriram City Union finance dropped 5.73% to Rs 2,021 and that of Shriram Transport Finance dropped 6.2% to Rs 1,385 as brokerages were divided on the benefits of the merger. While CLSA did not see any meaningful financial impact for Shriram Transport from the merger, analysts at JP Morgan wrote in a note that the merger results in slight dilution but removes a large overhang. However, a technical overhang of private equity investors selling out to remain post-merger. It was however maintaining its “overweight” recommendation on the stock. Analysts at Jeffries said any overhang of stock supply from non-promoters needs to be watched. Shriram group on Monday announced a consolidation exercise that will create India’s largest retail financing NBFC. The Chennai-headquartered group said that the boards of its group companies have cleared a restructuring process which will bring all finance businesses under one entity, spin off insurance business into a separate entity and thereby sharpen focus on businesses. Under the terms of restructuring, Shriram Capital, the holding company of the group which counts promoters, Piramal and TPG as shareholders and Shriram City Union Finance, the retail lending arm of the group, will be merged into Shriram Transport Finance. The merged Shriram Transport will be renamed as Shriram Finance. The insurance business will be hived off and all other businesses will be held separately outside the listed entity.