Shares of Shriram Finance, formerly known as Shriram Transport Finance Company Limited (STFCL), fell 7% to Rs 1,294 on the BSE in intraday trade on Thursday after the company allotted an additional 174 million equity shares under a scheme of comprehensive arrangement and amalgamation involving various Shriram Group entities. The S&P BSE Sensex was down 0.65% at 60,514 at 09:46 am.

In a notification dated December 28, 2022, BSE said: “With effect from Thursday, December 29, 2022, 17,43,44,710 shares of Shriram Finance were listed and allowed to trade on the exchange at Rs 10 each.”

Equity shares issued under the composite scheme of arrangement and amalgamation of Shriram Business Consultancy Private Limited and Shriram Financial Ventures (Chennai) Private Limited and Shriram Capital Limited and Shriram Transport Finance Company Limited, and Shriram City Union Finance Limited and Shriram LI Holdings Private Limited and Shriram GI Holdings Private Limited and Shriram Investments Holdings Limited and their respective shareholders are issued under a master plan of arrangement and amalgamation.

The merger of Shriram City Union Finance Ltd (SCUF) and Shriram Capital Limited (following the divestiture of several companies from the aforementioned Shriram Capital Limited) with the former STFCL. Subsequently, STFCL changed its name to Shriram Finance Ltd.

This has resulted in the entity becoming India’s largest retail non-banking financial company (NBFC) by assets under management (AUM). SFL is a diversified company with an AUM of Rs 1.71 trillion as on September 30, 2022. It serves over 6.7 million customers across India.

The merger provides room to increase the expansion and penetration of each company’s (SCUF and STFCL) products in other geographies. However, different products require different workforce and skills. In its rationale dated December 22, CARE Ratings said the company’s ability to capitalize on efficiencies of scale by expanding product offerings from former SCUF and STFCL affiliates and developing these products in untapped territories is key to double-digit growth in AUM reason.

The ratings also benefit from the management team’s long-term experience in their respective product areas and ample capital buffers, which are expected to remain strong. The rating agency said an improved balance sheet and the combined entity benefited from SCUF’s relatively short loan maturities.