Merger within Shriram Group may help optimize costs, SCUF official says

It's been almost a year since reports emerged that Shriram Group is contemplating a merger between its non-banking finance companies (NBFCs) including Shriram City Union Finance (SCUF) and Shriram Transport Finance (STF). While the internal evaluation is still on, the NBFCs will have better access to funds at a time when borrowing costs are high if the merger materializes.

"One of the benefits of the merger is the size. The ability to raise liabilities improves and it has a cost advantage," R Chandrasekar, Executive Director and CFO, SCUF said. "We are looking if we can optimize costs within the group. There is a lot of duplication happening among group companies. This is one of the reasons why a merger is being contemplated."

While he did not give a timeline for the merger, Chandrasekar said the work was on. "Before deciding anything we need to look at whether it is value assertive or not. If it is value assertive, we will go to the stakeholders for their approval. It is work in progress, nothing definite as such," he added.

The liquidity crunch after the IL&FS defaults led to a spike in the cost of borrowings for NBFCs in 2018-19. SCUF saw a rise in the cost of borrowing to 9.01 percent, from 8.44 percent in the previous financial year. The cost of funds for STF also rose to 9.7 percent, from 8.7 percent in the previous financial year.