Shriram Transport Finance opened today morning with a fall of over 5.5% at Rs.1020 and went on to hit an intraday low at Rs.1011, down over 6.5%.

There is news from CNBC TV 18 that some 10% of its equity changed hands on the NSE today at Rs.1000-1023/share.

The unconfirmed news is that Piramal Enterprises might have sold its entire 10% stake in the company, ahead of the merger in Shriram Group companies. Piramal had purchased this 10% stake in 2013 at Rs.723/share.

The group is considering merger with Shriram City Union to list holding company Shriram Capital, as a full-fledged financial services firm (NBFC, housing, insurance) and also provide exit to investor Piramal Enterprises, thus removing overhang on valuations.

As explained in our ‘Stock Recommendation’ section, this merger is expected to drive synergies, with loan book of ~Rs. 1.3 lakh crore, lower concentration risks, diversified liability profile, increased Tier I capital and improved credit ratings. Since Shriram Transport is the bigger and stronger of the group companies, it is unlikely to have an unfavourable merger ratio with respect to its shareholders.