MUFG Bank Ltd. is set to invest ₹39,618 crore (approximately $4.4 billion) in Shriram Finance Limited through a preferential issue of equity shares. This investment marks one of the most significant foreign direct investments (FDI) in India's financial services sector. The proposed transaction has been approved by Shriram Finance's Board of Directors.
The investment will result in MUFG Bank acquiring a 20% equity stake in Shriram Finance on a fully diluted basis. As part of the transaction, MUFG will also gain the right to appoint two nominee directors to Shriram Finance's board. Shriram Finance stated that this investment marks a defining moment in its growth journey. The company believes that MUFG, as one of the world's largest financial institutions with a strong international presence, will bring long-term strategic value. Following the completion of the transaction, Shriram Finance will become an equity affiliate of both MUFG and MUFG Bank.
According to analysts, Nomura called MUFG's entry a "big positive", forecasting a 24% rise in book value per share and expects return on assets to reach 3.7%. Nomura has also raised its FY28 AUM growth estimate to 20% from 17%. Jefferies noted that MUFG's capital infusion would lift the tier-1 ratio to 30% and improve the likelihood of an AAA credit rating, boosting competitiveness in commercial vehicle and MSME lending.
Mitsubishi UFJ Financial Group, MUFG Bank’s parent company, has a long-standing presence in India, spanning over 130 years, with cumulative investments of $1.7 billion and employing around 5,000 people. The proposed investment in Shriram Finance will be MUFG's largest investment in India to date. MUFG has signed a memorandum of understanding regarding a strategic collaboration with Shriram Finance, aiming to accelerate Shriram Finance's growth via partnerships.
Shriram Finance shares experienced a surge of over 3% following the announcement, reaching an all-time high. This reflects the positive market sentiment surrounding the investment's scale and strategic nature. The company has said that the signing of agreements with MUFG Bank reinforces confidence in India's lending and financial services sector fundamentals and future growth potential. It is expected to strengthen SFL's capital base and accelerate its growth trajectory.
The investment is subject to shareholder approval, regulatory clearances, and other customary closing conditions. MUFG Bank currently operates in six locations across India, providing banking services to corporate clients. Shriram Finance aims to strengthen capabilities, drive economic progress, and create meaningful impact across communities, building a future-ready institution anchored in trust and good governance. This deal has also taken the cumulative value of transactions in India's financial services space this year to over $11 billion.
