The Chennai-based Shriram group is initiating talks with its insurance joint venture partner Sanlam to sell part of its stake, which will help it get RBI permission to merge its unlisted flagship, Shriram Capital, with listed entities. The recent move in the Union budget to allow FDI upto 74 per cent in insurance has given a fillip to the deal. The merger with listed entities will help provide an exit to the Mumbai-based Piramal group and TPG which own stakes in various Shriram group companies, including the flagship.

The merger was on hold for over a year after the RBI asked Shriram to first sell stakes in the insurance venture before it could approve the merger proposals of the NBFC with Shriram City Union Finance and Shriram Transport Finance Co Ltd.

The merger would have made the flagship NBFC’s holding 77 per cent in insurance JVs, which the RBI wanted to be below 50 per cent. With the Indian government allowing foreign companies to increase their stake to 74 per cent, it has given an option to foreign partners to increase their stake in insurance companies. While Piramal can exit by selling its stakes in the listed entities via the stock market, it is stuck with the Shriram Capital stake. The book value of the Piramal stake in Shriram is worth Rs 3,954 crore.

PEL had invested a total amount of Rs 4,583 crore in Shriram group companies, which included Rs 1,636 crore for a 10 per cent stake in Shriram Transport Finance Corporation, and Rs 2,146 crore for a 20 per cent stake in Shriram Capital Limited. It also invested Rs 801 crore for a 10 per cent stake in Shriram City Union Finance. As on Wednesday, Shriram City Union closed at Rs 1,487 a share — giving it a total market valuation of Rs 9,811 crore.