Shriram Group to exit Shriram Properties by selling stake to CEO Murali

Shriram Properties will continue to use the Shriram name for a specified period of time.

Chennai-based non-banking financial conglomerate Shriram Group has decided to exit Shriram Properties, said two people aware of the development. It will sell its stake to M Murali, the chief executive officer of the property company, they said.

Discussions are on within Shriram Group on the way forward for the disengagement with Shriram Properties. The modalities of the exit — the method and the price — are still being worked out and could happen within a month or so, said one of the sources.

Shriram Group holds a 27.78 percent stake in Shriram Properties, a residential real estate development company focused on the mid-market and affordable housing categories, through its investment in a joint holding company called Shriram Properties Holdings Private Ltd. Shriram Group Executive Welfare Trust has a 0.14 percent stake in the company, while Murali owns a 0.08 percent stake.

The exit by Shriram group will not have any material transformation in the promoter holding in Shriram Properties as Murali is part of the promoter group. Thus, it will not necessitate an open offer to shareholders.

When contacted, a spokesperson for Shriram Group said he had no comments to offer on Shriram Properties which had no bearing on the financial services business of the group.

Focus on financial services

Shriram Group’s decision to exit is not surprising as it has decided to focus on the financial services business. It is now the largest retail NBFC (non-banking finance company) in the country after an elaborate restructuring exercise. The total Assets under Management of Shriram Finance as on December 31, 2022 stood at Rs 177,498.17 crore.

Shriram Group, according to its founder R Thyagarajan, recently sold its undisclosed holdings in Rambal Ltd, which has been in the business of precision auto components since 1957.

Shriram Properties would continue to use the Shriram name for a specified period, said a person aware of the matter.

The company started operations in Bengaluru in 2000 and has since expanded to other cities in South India, including Chennai, Coimbatore and Visakhapatnam. It also has a presence in Kolkata, where it is developing a large mixed-use project.

As of December 31, 2022, the company had a total portfolio of 51 projects aggregating to 52.75 million square feet of estimated saleable area with 23 ongoing projects and 28 upcoming projects.

The company's revenue grew 57 percent on-year to Rs 814 crore in FY23 with two key projects - Shriram Southern Crest (Bengaluru) and a part of Shriram Grand-1 (Kolkata) - reaching the revenue recognition threshold following receipt of the completion certificate.

Its EBITDA (earnings before interest, tax, depreciation and amortisation) stood at Rs 183 crore in FY23, while EBITDA margin reached 22 percent. The company's net profit increased to Rs 68.3 crore, reflecting 3.8x growth, compared to Rs 18 crore in FY22. The company’s gross debt stood at Rs 553 crore and net debt at Rs 432 crore as of March 2023.