Shriram Transport Finance and Shriram City Union Finance shares tumble over 6% post merger

The share price of Shriram Transport Finance declined more than 6 percent on Tuesday. The stock was down 6.32 percent at Rs 1383 on the Bombay Stock Exchange (BSE) and Rs 1,382.40 on the National Stock Exchange (NSE) at 1:30 pm.

The downtrend in the Shriram Transport Finance comes following its merger with Shriram group’s Shriram Capital Limited (SCL) and Shriram City Union Finance Ltd (SCUF) on Monday. Shriram Capital Ltd is the promoter of STFC and SCUF.

It seems the merger announcement did not go well with Shriram City Union Finance investors as well as the stock witnessed profit booking. At 1:30 pm, the stock of the finance company was down 5.55 percent at Rs 2024.65 apiece on BSE and 5.76 percent Rs 2,023 per share on NSE. Earlier in the day, the share price dipped as much as 6.4 percent.

The merged entity will be known as Shriram Finance Ltd, which according to the group will be the largest retail finance non-banking finance company (NBFC) in the country.

“The merger would help the group bring together all its lending products – Commercial vehicles, Two-Wheeler Loans, Gold Loan, Personal Loan, Auto Loan & Small Enterprise Finance - under a single roof, thereby creating a financial powerhouse which would end up being a market leader in all the product and consumer segments that it operates in,” the Shriram group said in a statement.

According to exchange filing, the merger is subject to the approval of shareholders of SCL, SCUF and STFC respectively, regulatory approvals of Reserve Bank of India, Competition Commission of India (CCI), Insurance Regulatory and Development Authority (IRDA), National Company Law Tribunal (NCLT) and such other regulatory approvals as may be required.

The company intends to soon launch a Super-App where all its existing and new lending products would be offered under the Shriram Finance umbrella. The group said Revankar would be the Vice-Chairman of the merged entity. Shriram City Union Finance's Managing Director and CEO Y S Chakravati would be MD and CEO of the merged entity.

Umesh Revankar, the VC and MD of Shriram Transport Finance told CNBC-TV18 that the shareholders of Shriram City Union Finance will get a stake in Shriram Transport Finance Corporation. He added that the deal is a win-win for shareholders, customers, and employees.

Moreover, Revankar expects an incremental growth of 10 percent in the profit after tax (PAT) due to the merger for the first two years.