IDFC-Shriram Merger: Everything You Need To Know

July 6: The Rumours
If stock markets are to be believed, a plan is brewing at the headquarters of one of India's youngest private sector lender - IDFC Bank. Shares of the bank have risen for three consecutive trading sessions with market analysts speculating that a merger with another financial services company may be on the cards. The Shriram group's twin non-banking firms – Shriram Transport Finance and Shriram City Union Finance - are being cited as possible merger candidates.
Read: An IDFC Bank-Shriram Merger? Will They? Should They?

July 8: Merger In The Making
Shriram Group and IDFC have entered into 90-day exclusive talks for a merger but no transaction has been finalised yet, Shriram Capital Chairman Ajay Piramal said in a media briefing on Saturday.
The boards of IDFC Bank Ltd., Shriram Transport Finance Company Ltd. and Shriram City Union Finance Ltd. gave in-principle approval to the exclusive talks, the three entities said in separate stock exchange filings.
Read: IDFC, Shriram Group Enter 90-Day Exclusive Merger Talks

July 9: Not Quite A Win-Win
In a complex, multilayered deal IDFC Ltd. and IDFC Bank Ltd. hope to combine with the three Shriram Group companies in order to put under one umbrella a financial conglomerate that covers banking, infrastructure lending, transport finance, consumer finance, insurance and asset management.

But will this strength in numbers and size be advantageous for all the shareholder groups involved?

Unlikely, says Edelweiss Securities in a report published on July 9.

Read: It May Be A Win For IDFC Bank But Is The Mega Deal A Win For Shriram Group Companies?

July 10: Winners And Losers
Five sets of shareholders will be impacted if the mega IDFC Group and Shriram Group merger does take place. Not all of them may stand to gain from the merger, the preliminary design of which was shared on July 8. While the exact contours are yet to be worked out, it is bound to be complex and layered.
Read: IDFC - Shriram Deal: Who Gets What

July 10: IDFC Bank's “Desperation”?
In 2014, when the in-principle approval for a banking licence was granted, analysts had questioned whether launching a universal bank is the best way forward for IDFC Ltd. The organisation had deep expertise in infrastructure credit, which could be leveraged for corporate lending, but had no experience at all of retail lending in India. In contrast, Bandhan Financial had a clear retail client base which it could develop as it moved from being a microlender to a bank.

But Rajiv Lall, who was then chairman of IDFC Ltd., was convinced that converting to a universal bank was the way to go and so IDFC Bank Ltd. was launched in October 2015.
Read: IDFC Bank: A Bank In A Hurry