Shriram Group Realigns Its Governance Structure As Piramal, TPG Mull Exit

Shriram Capital Group on Tuesday said it will realign its governance structure as Piramal Enterprises Ltd. and private equity firm TPG evaluate offloading their stake in the non-bank lender.

The Chennai based non-banking financial will revert to being run by Shriram Ownership Trust, DV Ravi, managing director at Shriram Capital and managing trustee of the trust, said in a statement to the stock exchanges. “The leadership, vision and direction will be provided to the group companies by the SOT through various board of the companies.”

The company said it will continue to actively engage with all partners including, Sanlam, which currently owns 26 percent in Shriram Capital via Sanlam Emerging Markets. The South African financial services group also own 23 percent stake in Shriram Capital’s life and general insurance businesses.

The move follows exit of Piramal Enterprises from Shriram Transport Finance Company Ltd. earlier this month. The billionaire Ajay Piramal-backed company had sold its entire stake in the asset financier for Rs 2,316 crore.

Piramal’s plan to exit Shriram Capital is part of its long-term strategy to fund growth of its own financial services business, the stock exchange filing said, adding that TPG’s evaluation of an exit from the company is consistent with its investment review practices, and takes into account the period of time TPG has been invested in Shriram Capital.

Earlier this year, Piramal Enterprises announced its intention to exit from Shriram Group companies and redeploy capital for strategic growth in its own financial services business. Piramal Enterprises owns a 20 percent stake in Shriram Capital and a 10 percent stake in Shriram City Union.

Shriram Capital said it will continue to evaluate various restructuring initiatives like “rationalisation of holding structure including consolidation, acquisition, restructuring, combinations between the various entities in the Shriram Group companies in the form of mergers or demergers”. These initiatives will help optimise cost, drive synergies, cut out intermediate layers with a view to enhance value to the various stakeholders, it said.

Piramal’s exit from Shriram Transport had led to some doubts over the merger process of the Shriram Group companies. “There have been talks of a merger of the Shriram Group companies and we believe this transaction does not remove that possibility if shareholders see value or synergy in merging,” Citi said in its note.