Shriram Finance shares are in focus on Monday following the announcement that Japan's MUFG Bank will acquire a 20% stake in the company for ₹39,618 crore (approximately $4.4 billion). This investment marks the largest foreign investment in India's financial services sector.
The deal, structured as a preferential allotment of shares, will see Shriram Finance issue 47.1 crore shares to MUFG Bank at ₹840.9 apiece. This price represents a 3.3% discount to the Thursday closing price, but the purchase comes at a premium of almost 16.5% to the ₹1.7 trillion market capitalization of SFL on Friday. Following the announcement, Shriram Finance's stock price climbed to a 52-week high of ₹914.10 in intraday trading on Friday, before closing at ₹901.75 on the BSE, a 3.74% increase from the previous day.
The transaction is subject to shareholder approval, regulatory clearances, and customary closing conditions. Upon completion, Shriram Finance will become an equity affiliate of both MUFG and MUFG Bank. As part of the arrangement, MUFG plans to appoint two directors to the board of Shriram Finance.
Shriram Finance stated that the capital infusion will significantly enhance its capital adequacy, strengthen its balance sheet, and provide long-term growth capital. The collaboration is also expected to unlock synergies in technology, innovation, and customer engagement, driving sustainable growth and improving access to lower-cost liabilities, potentially strengthening credit ratings.
MUFG Bank and Shriram Finance have also signed a memorandum of understanding (MoU) for a strategic partnership. This partnership aims to accelerate Shriram Finance's growth through closer collaboration between the two organizations. The collaboration is expected to support financing linked to road transport and logistics while contributing to efforts aimed at improving financial inclusion in India.
MUFG's investment in Shriram Finance strengthens the trend of Japanese firms expanding in India's rapidly growing banking market. MUFG noted that Asia is its second home market, and India is one of the most important markets globally, expected to become the world's third-largest economy by 2030. MUFG's presence in India dates back to 1894.
Shriram Finance is one of the largest retail-focused non-banking financial companies in India, with approximately 3,200 branches. The company reported a total income of ₹41,859.47 crore and a net profit of ₹9,761 crore in FY25. As of September, the company managed assets of approximately ₹2.81 trillion.
KPMG India Corporate Finance, JP Morgan, AZB & Partners, and Nishimura & Asahi (Gaikokuho Kyodo Jigyo) advised MUFG Bank on the deal. Wadia Ghandy & Co. served as the legal advisor to Shriram Finance.
