Shriram Group and US-based TPG Capital, the global buyout arm of the leading global private equity investment firm, announced a definitive agreement in which TPG will invest up to $120 million (Rs 530 crore) to acquire a stake of up to 49 per cent in Shriram Retail Holdings Private Limited, the holding company of Shriram City Union Finance Limited.
This deal means that TPG will own up to 26.7 per cent of SCUFL, the Shriram group's consumer finance arm, which is a listed company.
Since the acquisition is in excess of 15 per cent in SCUFL the open offer clause will be triggered automatically under Securities and Exchange Board of India guidelines. Shriram Retail will have to make an open offer to shareholders of SCUFL of 20 per cent under Sebi guidelines. The public holding in SCUFL is currently around 50 per cent.
Shriram group executives said the money received from TPG will be mainly used to strengthen the company's financial services business.
This is TPG's second investment in Shriram Group. In February 2006, the firm, then known as Newbridge Capital, invested approximately $100 million in Shriram Holdings (Madras) Private Limited, taking a stake in its subsidiary Shriram Transport Finance Company Limited.
R Thyagarajan, chairman of Shriram Group, said, "TPG has been a partner with Shriram Group in its commercial vehicle financing business since 2006 and their involvement has had a positive impact in the growth of the business. Their involvement in the consumer finance business of the group will also significantly strengthen this business."
Puneet Bhatia, who headed the transaction for TPG, said, "Shriram City Union Finance has a unique franchise and possesses the formidable Shriram group culture of inclusive growth and value creation, and is well-positioned to ride the attractive macro opportunity to emerge as a leader in the retail finance landscape in India."
TPG was advised by DSP Merrill Lynch Limited and J Sagar Associates and the Shriram Group was advised by Kanga & Co.
Shriram City Union Finance Limited focuses on consumer durable, two-wheeler, personal and enterprise financing across India. The company began operations in 1986 as a deposit-taking NBFC engaged exclusively in truck financing until 2002, and thereafter expanded into consumer finance.
TPG Capital is the global buyout group of TPG, a leading private investment firm with more than $55 billion of assets under management.