Shriram Group Details Long-Awaited Corporate Restructuring

The Shriram Group has announced a long-awaited reorganisation of its corporate structure, which will involve the merger of two of its listed entities.

As per its announcement:

• Amalgamation of Shrilekha Business Consultancy Pvt. with Shriram Capital Ltd. Shrilekha is in the business of holding long-term investments.

• Demerger of financial services, life insurance, general insurance from Shriram Capital.

• Amalgamation of Shriram Capital (with remaining businesses) with Shriram Transport Finance Co.

• Amalgamation of Shriram City Union Finance Ltd. with Shriram Transport Finance.

Shriram Capital, a private entity, was so far the holding company for the group's businesses ranging from financial services and insurance to asset management. Shriram Capital holds about 25.56% in Shriram Transport Finance and 33.86% in Shriram City Union Finance, according to exchange data.

The share-swap ratio determined as part of the transaction, as detailed in an investor presentation, is as follows:

• Shareholders of Shriram City Union to receive 1.55 shares of Shriram Transport for every one share.

• Shareholders of Shriram Capital to receive 0.0978 shares of Shriram Transport for every one share.

• This further translates into Shriram Capital shareholders getting one share of Shriram Transport for every one share held by Shriram Capital in Shriram Transport.

• Shriram Capital shareholders will get 1.55 Shriram Transport shares for every one share of Shriram City Union held by Shriram Capital.

Post the restructuring, Shriram Financial Ventures will become the holding company, with shareholding from Shriram Ownership Trust and a few other entities being consolidated under it.

Post the amalgamation, Shriram Transport Finance, with assets under management of Rs 1.5 lakh crore, will be the country's largest retail non-bank finance company. The entity will likely be rebranded as Shriram Finance.

"This scheme is being undertaken to reorganise the group's businesses in order to enable focused growth strategies and capital infusion for each vertical," the exchange filing said.

Complex Holding Structure

The Shriram Group, founded in 1974 by R Thyagarajan, has had a complex holding structure. Apart from the shareholding that Shriram Capital has in entities ranging from finance to insurance, the holding company itself has a diverse ownership.

According to a Crisil note dated April 2021, shareholders in Shriram Capital include the Shriram Ownership Trust (29.7%), the Shriwell Trust (13.2%), the Sanlam Group (26%), the Piramal Group (20%) and TPG (9.4%).

For some time now, the group has been attempting to simplify its corporate structure, which would allow investors to exit.

On Nov. 30, the group had detailed a succession plan for the group.

The promotership of the Shriram Group has already been transferred to Shriram Ownership Trust, which holds stake in Shriram Capital Ltd. This promotership rests with the trust and not with an individual or family, the group had explained.

The trust will be governed by a board of four people from within the group:

• DV Ravi (managing director, Shriram Capital)

• Jasmit Gujral (MD, Shriram General Insurance Co.)

• Umesh Revankar (MD, Shriram Transport Finance Co.)

• R Duruvasan (former MD, Shriram City Union Finance Ltd.)

Founder Thyagarajan said he intends to step aside from a formal role within the organisation and only play the role of a mentor hereon.

The group also announced the appointment of Parag Sharma as Joint Managing Director and Chief Financial Officer of Shriram Transport Finance. In addition, YS Chakravarti has been appointed as additional director.