In a landmark deal strengthening financial ties between India and Japan, Mitsubishi UFJ Financial Group (MUFG) is poised to invest a massive ₹39,618 crore (approximately $4.4 billion) to acquire a 20% stake in Shriram Finance Ltd. This transaction, announced on Friday, stands as one of the largest cross-border investments in India this year and significantly adds to the momentum in the India-Japan financial services corridor.
Deal Structure and Strategic Context
The investment will be executed through a preferential allotment of equity shares. This move follows a report by Mint on December 17, which indicated MUFG's plans to invest between $4.5 billion and $5 billion for the stake, valuing Shriram Finance in the range of $22 billion to $25 billion. The board of Shriram Finance convened a meeting on Friday to formally consider fundraising proposals, which could include methods like a rights issue, preferential allotment, or a qualified institutional placement (QIP).
This deal is part of a growing wave of Japanese investments in India's financial sector. Notable transactions this year include Mizuho's majority investment in Avendus and Sumitomo Mitsui Banking Corp's acquisition of a stake in Yes Bank. The MUFG-Shriram pact underscores the deepening economic partnership between the two nations.
Shriram Finance: A Legacy of Evolution
Shriram Finance, India's second-largest non-banking finance company (NBFC), has undergone a significant transformation to reach this point. With assets under management of about ₹2.81 trillion as of September, the company operates over 3,000 branches nationwide.
Founded in 1979 as Shriram Transport Finance Company Ltd (STFC) by R. Thyagarajan, AVS Raja, and T. Jayaraman, the company listed on the stock exchanges roughly five years later. Its journey involved early investments from Tata Motors (then Telco) and Ashok Leyland. Over the decades, strategic mergers and consolidation shaped its current form.
A major restructuring occurred about three years ago when Shriram City Union Finance and Shriram Capital were merged into Shriram Transport Finance Company, which was subsequently renamed Shriram Finance. More recently, in 2024, the entity sold an 84.4% stake in Shriram Housing Finance to a Warburg Pincus affiliate for ₹3,929 crore.
The promoters currently hold a 25.39% stake in Shriram Finance, primarily through the group holding company Shriram Capital. Public and institutional investors, including the Government of Singapore (5.41%) and the Monetary Authority of Singapore (1.2%), hold the remaining shares.
Market Performance and Future Strategy
Shriram Finance's stock has reflected strong investor confidence, advancing 45% year-to-date and closing at ₹869.20 on the BSE on Thursday. The company is strategically pivoting its lending portfolio. With slower growth in its traditional vehicle finance segment, it is now focusing on emerging areas like renewable energy, merchant credit, fisheries, and supply chain finance.
It has also entered the merchant finance space through partnerships with fintech giants Paytm and PhonePe, disbursing ₹100 crore and ₹50 crore monthly, respectively. Additionally, it finances merchants associated with Walmart's Best Price.
Financially, the company has shown robust growth. Its total income for FY25 stood at ₹41,859.47 crore, up from ₹34,997.61 crore in FY24. Net profit also saw a healthy rise to ₹9,761 crore from ₹7,190.48 crore in the previous fiscal year.
The investment from MUFG, a global financial giant, is a powerful endorsement of Shriram Finance's market position and growth strategy. It not only injects substantial capital but also sets the stage for potential strategic collaboration, further solidifying the financial bridge between Japan and one of India's leading NBFCs.
