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IDFC, Shriram group announce merger talks

IDFC and Shriram group have entered into a merger discussion, representatives of the two entities announced at a press conference. Under the tentative arrangement, IDFC will be the holding company of the merged entity, Shriram City Union Finance, the retail lending arm of Shriram Capital, will be merged with IDFC Bank and Shriram Transport Finance will be a fully owned subsidiary of IDFC, which will also own 75% of the life and general insurance arms of Shriram Capital. According to Rajiv Lall, vice chairman and MD of IDFC, it is a complex deal. Ajay Piramal, chairman of Shriram Capital, said no transaction has taken place and valuations have not been fixed, and this is a preliminary talk. He added that this gives us an opportunity to create a financial conglomerate with a universal bank at its center, whose focus will be to provide a full range of products to millions of small customers and entrepreneurs. R. Thyagarajan, founder of the Shriram group, said the groups are clear that the merger should be beneficial for shareholders. If it is not going to benefit all shareholders, it will not be pursued, he added, After the merger, the mutual fund arm of IDFC would be integrated with Shriram Asset Management and could be listed. Shriram Transport Finance, which has assets under management of Rs 80,000 crore and a customer base of 1.4 million, may be delisted, post-merger. The merger would provide IDFC Bank a deeper retail presence and the Shriram group would benefit from lower cost of funds and the wholesale banking exposure of IDFC, said Deepak Parekh, former chairman of IDFC.

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