Mumbai: IDFC and Shriram Group are working on various alternative structures to try and ensure that their proposed merger goes through, Ajay Piramal, chairman, Piramal Enterprises, said in an interview. ET reported on Wednesday that IDFC Ltd and Shriram Capital had decided to work on a new formula to salvage the plan amid shareholder resistance and fears over dilution of holdings. “There are many structures which were being worked upon from day one. We have said that it will depend on what RBI says and it will depend on what the valuations are,” said Piramal, also chairman of Shriram Capital. “So, there are many permutations and combinations which go on.” ET had reported that the merger terms were being redone as share- holders and managements sparred over valuations. Piramal said the merger formula being worked on will make sure that the interest of shareholders is safeguarded.
“Shriram will not do anything which is not in the interest of its shareholders,” he said. “We will protect the interest of Shriram shareholders as long as I am there and we will protect the interest of PEL (Piramal Enterprises Ltd) shareholders because it has a large share. So, whatever combination, if it takes place, will only be in the overall interest of all the shareholders.” He also declined to comment on whether the 90-day exclusivity contract will be extended from its current October 6 end date. “We will see, there is still time,” he said. Shriram and IDFC entered into a 90day exclusivity arrangement on July 9 to consider a potential merger.
Shares of Shriram Transport Finance rose 4.16% after the company decided to put on hold its merger plan with IDFC. ET had reported on Wednesday that IDFC and the Shriram Group have decided to abandon the merger plan worked out in July as shareholder pressure and dilution fears force them to examine a new, less complicated structure.
Yellen said on Tuesday the Fed needs to continue gradual rate hikes despite broad uncertainty about the path of inflation. The Fed, which has raised rates twice this year, is expected to effect one more increase in December.
“FIIs (foreign institutional investors) are taking some chips off the table because they have made money both in the Indian currency and equities, and they are finding other emerging markets more attractive at this juncture,” said Ritesh Jain, chief investment officer, BNP Paribas Mutual Fund.
Foreign investors have sold stocks worth almost ₹ 20,100 crore since August 1. Though their selling on Wednesday was moderate compared with some recent days, fund managers said more outflows are likely.
“FII selling could continue till the time the rupee finds a bottom and commodity prices, and oil in particular, reverse lower,” said Jain.
The Volatility Index soared 6.30% to 13.74 — the highest in a month — suggesting traders’ perception of near-term risks is high.
The selloff in the broader market was sharper with mid- and small-cap indices falling 2% each on Wednesday. Losers outnumbered gainers 2010:539 on the BSE.
The recent declines in the stock market, which were triggered by geopolitical tensions in the Korean peninsula, aggravated on worries about a further delay in corporate earnings revival. Investors have been concerned about lofty share valuations for a while, but hopes of a recovery in companies’ profitability had kept them going. With the economy slowing down in the June quarter, partly due to the after-effects of demonetisation, and the implementation of goods and services tax expected to cramp companies’ profits, market participants feel share valuations would not sustain. “There are concerns on premium market valuation and weak earnings growth trend associated with earnings revisions on the downside,” said Mahesh Nandurkar, India strategist at CLSA. Nandurkar, however, believes earnings growth recovery is near, and that foreign investor interest will revive soon.
On Wednesday, other Asian markets ended mixed. Oil prices fell for the second day with the Brent November crude futures trading at $58.13 a barrel at the time of going to print.
The Fed, which has raised rates twice this year, is expected to effect one more increase in December
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