Mumbai-based billionaire Ajay Piramal's eponymous Piramal Group is in advanced talks to buy US private equity firm TPG Capital's 20.27% stake in India's largest truck financier, Shriram Transport Finance Ltd (STFL), for around Rs3,500 crore, two people with direct knowledge of the negotiations said.
"TPG Capital has already sounded out its partner (Shriram) about Piramal Group being a potential buyer, and it has given its consent," one of the persons told ET, adding that contours of the proposed deal involve TPG selling its entire holding in a block sale to Piramal HealthcareBSE 0.31 % at current market price. "The sale will fetch around Rs3,500 crore and the block sale will help TPG save on capital gains tax."
The second person said negotiations are in advanced stages and a deal is likely to be sealed by January-end or early February.
Puneet Bhatia, head of TPG Capital in India, declined comment while the Piramal Group, whose businesses span healthcare to real estate, said in an emailed response: "As a policy, we do not comment on market speculation." Piramal, who is sitting on a moun-tain of cash since selling his formulations business to America's Abbott Laboratories in 2010 for $3.72 billion, has made no secret of his desire to diversify into financial services.
A significant foothold in Shriram, one of India's biggest and most successful finance firms, could help him realise that dream. A successful purchase of a sizeable minority stake in Shriram TransportBSE 0.11 %Finance would rank as the latest instance of an opportunistic acquisition by Piramal.
Other recent acquisitions include the deal for an 11% stake inVodafone India, the country's second-largest mobile telephony company by subscribers, for about Rs6,000 crore.
In June this year, it bought US-based Decision Resources Groupfor $635 million.
A deal with Piramal would mean a tidy profit for TPG, which bought into Shriram for Rs 486 crore and has been trying since last year to exit it. TPG bought into Shriram in 2006 through affiliate Newbridge Capital, which acquired a 49% stake in unlisted group holding company Shriram Holding Madras Pvt Ltd.
TPG found it difficult to exit the investment initially because of certain non-transferable covenants in the shareholder agreement with Shriram that diminished its allure. But the merger of the holding company with the listed STFL, completed just a few weeks ago, now offers it an exit.
TPG, a global buyout fund with around $54.5 billion of assets, owns 4.6 crore shares, or 20.27% of Shriram Transport, which can be sold either in pieces or in one block. At Friday's closing price of Rs 750.20 a share, these shares command a value of Rs 3,450 crore. STFL, which controls up to a fourth of the pre-owned truck financing business and 7-8% of new truck financing, commands a market value of Rs 17,018 crore.
While the Shriram Group declined comment, one official, who requested anonymity, said the group was not averse to the Piramal Group coming in as a minority shareholder, although details about the rights the new minority shareholder would have were yet to be finalised.
"The valuation part of the deal is more or less finalised. However, the relationship between the new financial investor and the management is yet to be defined," the official said. Although it may not enjoy the same covenants held by TPG, it is expected that the Piramal Group could be granted some privileges by virtue of its large holding.
The senior Shriram official said the group was not keen to give special rights of the sort TPG enjoyed to the buyer. "But, we have not reached that stage," the official added.
A former head of another US private equity firm said ideally for Shriram, TPG should have sold its interest to another like-minded financial investor.
"Knowing Piramal's interest in financial services, a sale will be like bringing in a Trojan horse," said the person, requesting anonymity.
"TPG Capital has already sounded out its partner (Shriram) about Piramal Group being a potential buyer, and it has given its consent," one of the persons told ET, adding that contours of the proposed deal involve TPG selling its entire holding in a block sale to Piramal HealthcareBSE 0.31 % at current market price. "The sale will fetch around Rs3,500 crore and the block sale will help TPG save on capital gains tax."
The second person said negotiations are in advanced stages and a deal is likely to be sealed by January-end or early February.
Puneet Bhatia, head of TPG Capital in India, declined comment while the Piramal Group, whose businesses span healthcare to real estate, said in an emailed response: "As a policy, we do not comment on market speculation." Piramal, who is sitting on a moun-tain of cash since selling his formulations business to America's Abbott Laboratories in 2010 for $3.72 billion, has made no secret of his desire to diversify into financial services.
A significant foothold in Shriram, one of India's biggest and most successful finance firms, could help him realise that dream. A successful purchase of a sizeable minority stake in Shriram TransportBSE 0.11 %Finance would rank as the latest instance of an opportunistic acquisition by Piramal.
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In June this year, it bought US-based Decision Resources Groupfor $635 million.
A deal with Piramal would mean a tidy profit for TPG, which bought into Shriram for Rs 486 crore and has been trying since last year to exit it. TPG bought into Shriram in 2006 through affiliate Newbridge Capital, which acquired a 49% stake in unlisted group holding company Shriram Holding Madras Pvt Ltd.
TPG found it difficult to exit the investment initially because of certain non-transferable covenants in the shareholder agreement with Shriram that diminished its allure. But the merger of the holding company with the listed STFL, completed just a few weeks ago, now offers it an exit.
TPG, a global buyout fund with around $54.5 billion of assets, owns 4.6 crore shares, or 20.27% of Shriram Transport, which can be sold either in pieces or in one block. At Friday's closing price of Rs 750.20 a share, these shares command a value of Rs 3,450 crore. STFL, which controls up to a fourth of the pre-owned truck financing business and 7-8% of new truck financing, commands a market value of Rs 17,018 crore.
While the Shriram Group declined comment, one official, who requested anonymity, said the group was not averse to the Piramal Group coming in as a minority shareholder, although details about the rights the new minority shareholder would have were yet to be finalised.
"The valuation part of the deal is more or less finalised. However, the relationship between the new financial investor and the management is yet to be defined," the official said. Although it may not enjoy the same covenants held by TPG, it is expected that the Piramal Group could be granted some privileges by virtue of its large holding.
The senior Shriram official said the group was not keen to give special rights of the sort TPG enjoyed to the buyer. "But, we have not reached that stage," the official added.
A former head of another US private equity firm said ideally for Shriram, TPG should have sold its interest to another like-minded financial investor.
"Knowing Piramal's interest in financial services, a sale will be like bringing in a Trojan horse," said the person, requesting anonymity.
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