The Chennai-based Shriram Capital and IDFC Bank are set to begin 90 days of exclusive negotiations next week for an all-stock merger that could create a Rs 60,000-crore financial powerhouse, with both groups filling gaps in each other’s businesses.

According to an investment banking source, the lending business of the Shriram group, which includes listed companies such as Shriram Transport Finance and Shriram City Union Finance, could be merged with IDFC Bank, while the unlisted life and general insurance companies could be merged with IDFC.

Post-merger, both Shriram Capital, the holding company of the group, and the BSE-listed IDFC will emerge as holding companies of the new entity.

A board meeting of Shriram Capital has been called on Saturday to discuss the merger. IDFC Bank and IDFC did not inform the stock exchanges of any board meetings till Thursday evening.

If the merger fructifies, it will provide liquidity to Piramal Enterprises’ 2014 investment of Rs 2,014 crore for a 20 percent stake in the unlisted Shriram Capital.

The Piramal group had started investing in the Shriram group by acquiring a 10 percent stake in Shriram Transport Finance Company for Rs 1,636 crore in 2013. Shriram Transport Finance Company has a Rs 30,000-crore truck financing business.

A year later, the Piramal group invested another Rs 790 crore in Shriram City Union, a consumer and gold finance company, for a 10 percent stake.

In 2015, Ajay Piramal finally took over as chairman of Shriram Capital. Rajesh Laddha, former chief financial officer of Piramal Enterprises, was appointed managing director and chief executive officer of the company last month.

After merger, Piramal Enterprises would not be able to own more than a 10 percent stake in the merged entity under the Reserve Bank of India’s norms on corporates owning stakes in banks, said a banking source.

The merger with Shriram Capital will help the IDFC group to meet its financial inclusion targets and increase its retail portfolio. IDFC Bank’s loan portfolio is made up predominantly of corporate and infrastructure advances. With problems in the infrastructure sector and tepid demand for corporate credit, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.

An IDFC Bank statement said the bank kept evaluating opportunities and if anything concrete fructified it would inform the stock exchanges. “At this point, there is nothing that can be disclosed,” it said in a statement to the stock exchanges. “Under the circumstances, we are unable to confirm or deny the news reports. Meanwhile, we cannot comment on market speculations,” it added. A similar statement was issued by the Shriram group’s listed companies.

The stock prices of all the companies reacted positively following reports of the merger talk on Thursday.

Piramal Enterprises’ shares were up 4.5 per cent to Rs 2,938 a share and its market capitalisation crossed Rs 50,000 crore.

The stock price of IDFC, the holding company of IDFC Bank, was flat at Rs 60 a share, while IDFC Bank’s shares were up 1.7 percent.

Among the Shriram group companies, the Shriram Transport Finance Company stock was up 1.2 percent, while Shriram City Union Finance was down by 1 percent.

Taking into account today’s market capitalisation, the merger will create a Rs 60,000 crore plus entity. Shriram Capital and its operating entities have a customer base of over 12 million, more than 60,000 employees in 3,000 offices, net profit of Rs 2,200 crore and assets under management in excess of Rs 90,000 crore. Its chit fund business is housed directly under the Shriram Ownership Trust and is not expected to be affected by the merger.