The Hindu : Business : Two Shriram group cos. merge

Online edition of India's National Newspaper
Friday, Jul 29, 2005

Business

Business

Two Shriram group cos. merge

K. T. Jagannathan

Combined entity will enjoy stronger synergy of financial resources, managerial and marketing expertise

CHENNAI: The Shriram group has announced a merger ratio of 1:1 for the amalgamation of Shriram Investments Ltd. (SIL) with Shriram Transport Finance Company Ltd. (STFC).

The merger ratio is fixed based on the recommendations of Ernst and Young, which did the valuation.

The merger is, however, subject to approvals from the Madras High Court. R. Sridhar, Managing Director of STFC, said the merger process would be completed by December.

He told this correspondent that the Shriram group had been contemplating the merger of these two companies for quite some time now. Even the institutional investors had favoured the merger as the two had synergy in terms of expertise, people and business, he said.

Mr. Sridhar said the integration would go a long way in helping the resultant enlarged entity to get a better rating and access cheaper institutional credit.

SIL has a capital base of around Rs. 60 crore and STFC Rs. 65 crore. SIL reported a net profit of Rs. 12.86 crore (Rs. 9.56 crore) on an income of Rs. 85.67crore (Rs. 74.30 crore) for the first quarter ended June 2005. STFC posted a net profit of Rs. 12.96 crore (Rs. 10.09 crore) on an income of Rs. 92.13 crore (Rs. 71.98 crore) in the quarter under review. The combined disbursal of these two companies stood at around Rs. 3,000 crore, according to Mr. Sridhar. The two together have raised deposits/debentures worth around Rs. 2,800 crore, he added. They have around 250 branches across the country.

Institutional investors like Citicorp (9.5 per cent), UTI Bank (around 4.5 per cent), Reliance Capital (about 4.5 per cent) and ChrysCapital (20.6 per cent) hold similar stakes in the two Shriram group firms. The promoters hold around 25 per cent stake in the two firms through a newly floated holding arm, Shriram Financial Services Holding Company.

Stock option scheme

R. Thyagarajan, Chairman of Shriram group, said in a release that the combined entity will enjoy a stronger synergy of financial resources, managerial and marketing expertisethat will enhance value for all our investors and stakeholders.

The boards of STFC, SIL and Shriram Overseas Finance Ltd (SOFL) have meanwhile decided to implement an employee stock option scheme (ESOS), covering about 500 employees of all three companies.

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