Shriram Group likely to submit EoI for IDBI Bank

The Shriram Group is likely to submit an expression of interest (EoI) for IDBI Bank and has been working on a structure for a possible bid for the state-owned lender that is being sold through a competitive bidding process, according to people in the know. The Chennai-headquartered financier may float a separate holding company to participate in IDBI Bank’s privatisation, the people said.

Fairfax Also Likely 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 contest for IDBI Bank with Prem Watsa’s Fairfax Financial also believed to be a contender.

While talks to form a consortium with financial investors are also underway, Shriram has not reached a mutually acceptable commercial arrangement with investors that may want to join its consortium. If a consortium is formed, the non-bank lender will be the lead member.

Shriram was amongst 18 participants that attended virtual roadshows organised by the government in April to brief potential suitors about the privatisation plan, according to sources. The government of India released a preliminary information memorandum on October 7, detailing its proposal to sell a majority stake in IDBI Bank. The deadline for submission of EoIs for IDBI Bank is December 16.

“The query is speculative. As a matter of policy, we do not comment on speculation,” said a Shriram Group spokesperson.

Fairfax chairman Prem Watsa told ET in an April 7 interview, when asked about his company’s interest in the upcoming privatisation of banks, that it was “looking at all of those opportunities.”

IDBI Bank’s privatisation has been designed as a two-stage process. In the first, potential suitors will submit EoIs. Their suitability to participate in the privatisation process will be assessed by the Reserve Bank of India (RBI) and they will have to clear the regulator’s ‘fit and proper’ test and get government security clearance. In the second stage, those that have cleared the first stage will be allowed to conduct due diligence and submit a financial bid for the bank.

The government of India and state-run Life Insurance Corp. of India (LIC) are selling a 60.72% stake in IDBI Bank as per the preliminary information memorandum issued by the Department of Investment and Public Asset Management (DIPAM). Their combined ownership in the bank is 94.72%. After the stake sale they will collectively retain 34%. Interested parties need to have a minimum net worth of ₹22,500 crore to submit an EoI.

The preliminary information memorandum was rolled out after months of internal deliberations and stakeholder consultations within various government departments and with regulators such as the RBI and the Securities and Exchange Board of India (Sebi) as well as prospective buyers.

The Shriram Group had announced a restructuring in December 2021. In a notification to stock exchanges on December 13 it said that the unlisted Shriram Capital would demerge its non-lending businesses and merge with the listed Shriram Transport Finance and Shriram City Union Finance to form a new entity, known as Shriram Finance.

The combined entities have assets under management of Rs 1.5 lakh crore.

Thyagarajan has successfully struck partnerships with investors who have provided capital for Shriram Group’s expansion plans over time. This has given the group a diversified shareholder base. For instance, TPG is an investor in parent company Shriram Capital. Piramal Enterprises is an investor in Shriram Capital and also owns a stake in the listed Shriram City Union Finance. Apax Partners also has a stake in Shriram City Union Finance. More recently, KKR invested in the group’s general insurance arm.

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