Buys 10% stake in the NBFC from private equity firm TPG.
Piramal Enterprises has acquired a 10% stake in Shriram Transport Finance Co Ltd (STFC), the country’s largest player in commercial vehicle finance, for Rs 1,652 crore.
Piramal acquired 2,28,47,468 shares from US-based private equity major TPG Capital at a price of Rs 753 per share, making it the largest bulk deal so far this fiscal.
“We see this deal as a beginning of a long-term partnership with Shriram Group as its business is very much in harmony with what we are doing,” said Piramal group chairman Ajay Piramal.
Asked if the group planned to increase stake further in STFC, Piramal said, “There are no such plans as of now.”
Piramal group, with presence in pharmaceutical, financial services and information management sectors, had consolidated revenues of over Rs 3,560 crore last fiscal. In the financial services space, it has a real estate focused PE fund – Indiareit – and a non-banking finance company (NBFC) focused on lending to real estate and education sector with a loan book of Rs 1,000 crore.
The company also makes structured investments in infrastructure projects and has recently struck deals with Hyderabad-based infrastructure company Navayuga Road Projects and renewable energy firm Green Infra.
Earlier reports had said that for the financial services vertical, Piramal was looking to build an asset size of Rs 15,000 crore in the next five years.
The deal between Piramal and TPG also indicates that the latter may have completely exited its investments in STFC, generating near seven times returns in as many years.
Newbridge India Investment II Ltd, a unit of TPG, had in 2006 acquired a 49% stake in unlisted group holding company Shriram Holding Madras Pvt Ltd (SHMPL), which currently holds 41.25% in STFC. When STFC was merged with SHMPL in December 2011, Newbridge got a 20.28% stake in the merged entity.
As per Bloomberg data, the (post-merger) acquisition cost of the 2006 deal for TPG worked out to Rs 112.75 per share.
In a bulk deal on the National Stock Exchange in February, Newbridge had sold 23.15 million STFC shares (or a 10.2% stake) to a clutch of institutional investors for Rs 1,656 crore. That deal is understood to have netted TPG a whopping 450-500% returns, or a cool Rs 1,350 crore in profit.
Shriram Transport, which logged revenues of Rs 7,014 crore and a profit after tax of Rs 1,463 crore last fiscal, had assets of over Rs 52,717 crore under management and is among India’s largest player in commercial vehicle finance with a niche presence in financing pre-owned and small truck owners.
The company has a network of 528 branches and service centres across India and is also one of the largest asset financing NBFCs in the country.
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