Shriram Group may submit EoI for IDBI Bank

14 Oct 2022 , 02:31 PM

According to news reports, the Shriram Group has been developing a structure for a potential bid for the state-owned lender that is being sold through a competitive bidding procedure and is likely to submit an expression of interest (EoI) for IDBI Bank.

According to the reports, the financier with its headquarters in Chennai may establish a different holding company to take part in the privatization of IDBI Bank.

With Prem Watsa’s Fairfax Financial also rumored to be a contender, the entry of R Thyagarajan-led Shriram, which operates in segments such as commercial vehicle financing, two-wheeler financing, and micro, small, and medium enterprise loans, could set the stage for at least a two-way competition for IDBI Bank.

Shriram has not come to a mutually agreeable commercial agreement with investors who could want to join its consortium, despite talks to establish a consortium with financial investors also being in progress. The non-bank lender will serve as the consortium’s lead member if one is formed.

According to reports, Shriram was one of 18 attendees in virtual roadshows held by the government in April to inform possible suitors about the privatization plan. On October 7, the Indian government published a preliminary information memorandum outlining its plan to sell the majority of its holdings in IDBI Bank.

The privatization of IDBI Bank is being done in two stages. EoIs will be submitted by interested suitors in the first. The Reserve Bank of India (RBI) will evaluate their eligibility to take part in the privatization process, and they will be required to pass the regulator’s “fit and proper” test and obtain a government security clearance. Those who have passed the first step may perform due diligence and submit a financial offer to the bank in the second round.

According to the preliminary information memorandum released by the Department of Investment and Public Asset Management, the Indian government and state-run Life Insurance Corp. of India (LIC) is selling a 60.72% share in IDBI Bank (DIPAM). They hold 94.72% of the bank together. They will keep 34% following the share sale. To submit an EoI, interested parties must have a minimum net worth of Rs22,500 crore.

In December 2021, The Shriram Group made a reorganization announcement. The unlisted Shriram Capital would demerge its non-lending companies and merge with the listed Shriram Transport Finance and Shriram City Union Finance to form a new firm called Shriram Finance, it was announced in a statement to stock markets on December 13.

A total of Rs1.5 lakh crore in assets are being managed by the combined entities.

Thyagarajan has had success forming alliances with investors who have gradually contributed money to the Shriram Group’s expansion objectives. As a result, the group now boasts a diverse group of shareholders. For instance, TPG is a shareholder in Shriram Capital, the parent business. Piramal Enterprises owns an interest in Shriram City Union Finance, a publicly traded company, as well as Shriram Capital. Shriram City Union Finance also has a shareholding owned by Apax Partners. Recently, KKR made an investment in the general insurance division of the business.

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