Shriram Capital's consolidated profit after tax doubles in 5 years

Shriram Capital (SCL), the core investment company of the financial services and insurance business of Shriram Group, has seen its consolidated profit after tax more than double in five years.

Its total income grew to Rs 5,407 crore in 2018-19 (FY19), around 65 per cent in five years. Profit after tax grew from Rs 842.7 crore in FY15 to Rs 1,737 crore in FY19 (though there was a drop in FY16 (Rs 759.8 crore), according to company filings.

The amount grew 30.6 per cent in FY19 from the previous financial year’s Rs 1,330 crore. This took place despite the non-bank finance companies sector seeing a crisis after IL&FS started defaulting on its loans in August 2018.

The holding company counts Shriram Life Insurance (74.56 per cent stake) and Shriram General Insurance (76.66 per cent stake) as subsidiary companies. It has listed entities Shriram Transport Finance Company (STFC) and Shriram City Union Finance (SCUF) as associate companies, with 26.08 per cent and 33.74 per cent shareholding, respectively.

It also has 26.06 per cent stake in SCUF's subsidiary, Shriram Housing Finance, and 11.62 per cent in STFC's subsidiary, Shriram Automall India.

One of the main operating subsidiaries, Shriram Life Insurance Company (SLIC), showed growth in turnover to Rs 1,644 crore in 2018-19, from Rs 1,080 crore in FY15. Compared to the previous year, FY19 showed 9 per cent growth in individual new business, as compared to 16 per cent growth in the segment’s private sector and a one per cent fall for state behemoth Life Insurance Corporation, it said. Profit after tax was Rs 74.1 crore, compared to Rs 79.7 crore in FY15, after seeing a substantial decline in FY16 to Rs 18.4 crore and Rs 15.7 crore in FY17.

Shriram General Insurance Company showed growth in turnover from Rs 250 crore in FY15 to Rs 2,221 crore in FY19. Profit after tax also grew, from Rs 210 crore in FY15 to Rs 663 crore in FY19, according to company filings with the government.

SCL, which had 77.68 per cent stake in Shriram Value Services (SVSL), recently acquired the remaining shares in SVSL from the existing shareholders, including Nivedana Power and Syandana Energy.

An information technology and IT-enabled services entity, with domain expertise in financial and insurance services, SVSL is third largest among the 15 subsidiaries of SCL in terms of annual turnover. However, it registered a loss of Rs 2,155 crore during the year ended

March, 2019.

Shriram Group has been considering merger of the unlisted holding company with STFC and SCUF. This would make it a larger entity listed on the stock exchanges and allow the investors of SCL an option to exit.

At end-March 2019, the major shareholders in SCL were Shriram Financial Ventures and Shrilekha Business Consultancy, which together hold the majority of shares in SCL. TPG holds 9.43 per cent stake and Piramal Enterprises around 1,000 shares.

chartThere were reports that the merger move was stuck, with the Reserve Bank of India asking SCL to cut its stake in the insurance business. However, Shriram Group founder R Thyagarajan denied any such instruction and had told this publication: “The merger proposal continues

to be under serious consideration. There has been no change in the situation over the past few weeks.”

The merger is expected to pave the way for listing of SCL, he said earlier.

The proposed merger between the two listed entities came into the limelight mainly after talks between Shriram and IDFC Group for one were called off in October 2017.

The two sides failed to agree on a swap ratio, according to reports.

SCL saw its non-executive chairman, Ajay Piramal, resigning with immediate effect in November 2019, after expressing a plan to exit from the Group. He had exited from STFC earlier in 2019. Rajesh Laddha, a nominee of Piramal Enterprises, also resigned as managing director of SCL.

Piramal Enterprises has said he will continue on the board of directors at SCL, which has since appointed R Duruvasan, former

managing director of SCUF, as a wholetime director till end-November 2024.

In June 2019, Shriram Ownership Trust, which manages the business of Shriram Group companies, said SCL and its operating entities had an overall customer base of around 19 million, and about 75,000 employees across 3,800 branches. With assets under management in excess of Rs 1.5 trillion.

Shriram Capital halts 3-way merger with NBFC arms after RBI request

Shriram Capital has held off a plan to merge with its shadow lending arms after the Reserve Bank of India (RBI) requested the group to cut its stake in its insurance business, according to people familiar with the matter.

The unlisted Shriram Capital, which counts billionaire Ajay Piramal and private equity firm TPG Capital as investors, was planning to combine with its publicly traded units Shriram Transport Finance and Shriram City Union Finance. The proposal would have effectively turned the merged entity into a shadow lender along with a 77 per cent stake in life and general ventures.

The central bank was concerned because insurance business isn’t typically the remit of a non-bank financier, said the people, who asked not to be identified as the discussions were private. The banking regulator has recommended non-bank financiers including Shriram to lower their holdings in insurance business to 50 per cent or below, the people said.

The RBI’s direction is part of heightened scrutiny over the country’s troubled shadow lending sector after a major infrastructure financier defaulted on series of debt repayments, leading to severe cash crunch and sharp jump in bad loans.

Shriram Capital is considering to review the merger plan and could still revive the proposal, the people said. Representatives for the RBI and Shriram didn’t immediately respond to requests seeking comment.

A deal would have given TPG and Piramal an opportunity to exit from Shriram Capital. Piramal Enterprises, which bought TPG’s stake in Shriram’s transport finance unit in 2013, tried and failed to combine the Chennai-based group with IDFC more than two years ago.

Shriram Transport provides loans for new and pre-owned trucks, while Shriram City Union lends to borrowers to buy consumer goods and motorcycles.