IDFC duo gains while Shriram Transport Finance falls after calling off merger

NEW DELHI: Shares of IDFC, IDFC Bank and Shriram Transport Finance (STFC) turned mixed on Tuesday after the two companies scrapped merger plans to create what would have been one of India’s biggest financial services conglomerates after four months of negotiations during which they couldn’t agree on valuation.

Following the development, shares of IDFC Bank added 0.27 per cent to Rs 56.10 while those of IDFC Ltd surged 3.16 per cent to Rs 63.65 on BSE till around 9.45 am (IST).

Shares of Shriram Transport Finance fell 0.31 per cent to Rs 1,176.75 at around the same time.

"IDFC Ltd and IDFC Bank announced that they are discontinuing discussion with the Shriram Group with regards to a potential merger," IDFC said in a press release on Monday.

However, analysts believe that the deal would have been negative for the company. "In our opinion, cancellation of the proposed merger is very positive for Shriram Transport, as it would have led to STFC becoming a 100 per cent non-listed subsidiary of IDFC Limited, leading potentially to a holding discount with no visible merger benefits," said Nomura in its report.

For Shriram, the focus will now be back on the fundamentals of the core CV lending business, said analysts.