‘A transport finance biz cannot grow just in itself... it will slow down’
MUMBAI: IDFC Ltd’s proposed merger with Shriram group has raised a lot of questions from the reason to delist Shriram Transport to the potential benefits. In an interview, IDFC Bank chief Rajiv Lall explains the rationale behind the deal. Edited excerpts:
What’s the rationale behind the decision to delist Shriram Transport Finance Ltd (STFL)?
It’s a regulatory rationale. Merging Shriram Transport into the bank at this stage is regulatory-wise not possible because it would have implied a more than allowable dilution of the promoter entity (IDFC) which has an ownership stake in the bank. You cannot violate that.
When will the company’s shares get delisted?
Immediately. It will become a 100% subsidiary of IDFC Ltd, but it will be listed via IDFC. So, its profits and earnings will be captured in IDFC.
Do you intend to run down the book of STFL?
We will do whatever makes sense for shareholders. It’s too early to say how business is going to pan out. You could take the view that beyond a point, how far can just a transport finance business keep growing? From a much larger base, its growth will slow down.
You looked at other transactions before finalising on Shriram. Why didn’t the others work out?
Some had crazy valuations. There was no alignment of purpose. R Thyagarajan (Shriram group founder) said that he is dedicated to serving the community and this is what I’ve been trying to say. We want to do it in a profitable manner that creates value for shareholders.