Orix Corp in talks to buy TPG Capital stake; Shriram Transport up

Japanese financial services company Orix Corporation is in talks with TPG Capital to buy the private equity firm's holding of 20% in Chennai-based commercial vehicles financier, Shriram Transport Finance, in a deal which could be valued at over Rs 3,000 crore.

At 10:05 am, shares of Shriram Transport Finance were trading 1.72 per cent up at Rs 695.30 on the Bombay Stock Exchange.

Talks are now underway after an attempt by the Singapore government's sovereign fund Temasek to acquire TPG's stake failed said two people familiar with the discussions but who declined to be identified.

Orix Corp, which has a stake of over 23% in Infrastructure Leasing and Financial Services (IL&FS), is now seeking to boost its investments in overseas markets such as India and China. Shriram Transport Finance could be an ideal investment candidate given the business interest of Orix in leasing and financial products.

Orix manages assets of over $60 billion and operates in segments such as leasing, real estate, investment banking and automobile leasing besides financial services. The slowdown in the Japanese economy is also pushing other Japanese companies to explore new markets to expand and lift earnings in a country with an ageing population.

"Orix wants to forge ties with other groups in India. If the deal goes through, it would want to extend participation in the securities and infrastructure finance business of the Shriram group," said a person who has knowledge of the talks but spoke on the condition of anonymity considering the sensitivity of the issue.

TPG Capital, which bought into a holding company which controls shares in Shriram Transport Finance over five years ago, is now seeking to exit at a good valuation. TPG, which has valued its total shares at over Rs 3,000 crore, bought a 20% stake in Shriram Transport for 123 per share in 2006. The private equity firm wants to exit Shriram Transport Finance and invest in other business of the Shriram Group.

It has plans to invest 450 crore in Shriram Properties. The other entities of Shriram group in which TPG has holdings are Shriram Retail Private Holdings (49%) and Shriram City Union Finance (28%)

TPG is also reportedly talking to other sovereign funds such as Singapore-based GIC for the stake sale. Both TPG and Orix did not respond to the email queries. A senior official of Shriram Finance confirmed that talks were on.

Shriram Transport Finance with a market capitalisation of 17,600 crore is one of the largest trucks financing company in India. It has Rs 36,000 crore of assets under management and plans to increase it to Rs 50,000 crore by 2013. The company plans to expand the Infrastructure equipment financing business.

source : http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/orix-corp-in-talks-to-buy-tpg-capital-stake-shriram-transport-up/articleshow/8526492.cms

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Abhishek Padukone
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