Piramal Group Chairman Ajay Piramal is in early talks with Anand Mahindra and others to sell his stake in Chennai-based Shriram group of companies at a valuation of around Rs 9,000 crore. The billionaire industrialist who began investing in Shriram group in 2013 has not been able to realise his aspirations in the financial services sector.
Analysts have estimated Piramal's stake in the three companies under the Shriram group - Shriram Capital, Shriram Transport Finance, and Shriram City Union Finance - at around Rs 9,000 crore, the Economic Times reported. The deal is touted to be beneficial for both Piramal and Mahindra, the news report said.
Piramal owns 20% in Shriram Capital and 10% each in Shriram Transport Finance and Shriram City Union.
This is the second time that the industrialist is trying to offload his exposure to the Shriram group. He had tried to merge the group with the IDFC Bank in 2017 to enter the banking sector but the deal failed owing to regulatory and valuation challenges.
"In the long run, if ever there is a Black Swan event, you do need a fallback and that's where a bank will help," Piramal had said as he announced the deal with the IDFC Bank. His aim was to establish a financial conglomerate that could become India's largest mass retail platform, offering a wide range of financial products.
According to a report in The Times of India earlier this month, Piramal Enterprises and Private equity firm TPG had initiated a process to sell their stake in Shriram Capital which is the holding company of the Chennai-based financial services group. This had elicited interest from bidders like KKR and some global pension funds as well.
Piramal's investment in Shriram Group companies yielded him 14.37% annual return. As for Mahindra Financial Services Ltd, which is dealing with bad loans, this deal could be a stimulator to spur growth in the company. The industrialist is also open to negotiations with other investors, including private equity and buyout firms.
Mahindra Finance's assets are valued at Rs 63,000 crore along with with with a market valuation of Rs 25,584 crore while its bad loans are at 7.7% of the total sum. Meanwhile, Shriram Transport has Rs 86, 126 crore worth of assets with a market valuation of Rs 26,590 crore. Shriram City is valued at Rs 11, 411 crore and has Rs 28,795 crore worth of assets.