Shriram Finance shares hit 52-week high after confirming 20% stake sale to Japan’s MUFG

Mumbai | December 22

Japan’s largest banking group, Mitsubishi UFJ Financial Group (MUFG), is set to invest ₹39,618 crore ($4.4 billion) to acquire a 20% stake in Shriram Finance Ltd (SFL), marking one of the most significant foreign investments in India’s non-banking financial sector in recent years.

The investment will be carried out through a preferential issuance of equity shares, bringing fresh capital directly into Shriram Finance. Following the announcement, shares of the company climbed to a 52-week high, reflecting strong investor response to the deal.

Why this deal matters

The transaction brings together Shriram Finance’s deep domestic reach—particularly in used commercial vehicle financing, MSME lending and retail credit—with MUFG’s global financial strength, technology expertise and long-term capital base.

For Shriram Finance, the fund infusion is expected to:

• Enhance capital adequacy
• Strengthen the balance sheet
• Improve access to lower-cost funding
• Support long-term growth across key lending segments
• Tier-1 capital is expected to jump from 20% to 36%

The company stated that the partnership could also unlock synergies in technology, innovation and customer engagement, aiding sustainable expansion.

Strategic bet on India’s credit growth

For MUFG, the investment represents a strategic entry into India’s fast-growing retail and MSME credit market, which remains structurally underpenetrated. Rather than building operations from scratch, MUFG gains exposure through an established franchise with over 3,000 branches nationwide.

The investment values Shriram Finance at close to ₹1.98 trillion, implying a premium of around 16.5% to the company’s prevailing market capitalisation—an indication of strong long-term conviction.

MUFG has already invested about $1.7 billion in India over the years, and the Shriram Finance deal becomes its largest investment in the country so far.

Part of a broader India–Japan trend

The deal adds momentum to growing financial activity between India and Japan. Recent transactions in the corridor include:

• Mizuho’s majority investment in Avendus
• Sumitomo Mitsui Banking Corporation’s stake acquisition in Yes Bank

These investments highlight increasing global interest in India’s financial services sector amid rising domestic demand and formalisation of credit.

Investor takeaway

This deal is positive for Shriram Finance’s Shareholders. MUFG’s entry as a long-term strategic investor strengthens Shriram Finance’s financial position, improves growth visibility and reinforces global confidence in India’s retail credit ecosystem. The transaction also underscores India’s increasing role as a key destination for large-scale global financial investments.

About Shriram Finance

Shriram Finance is India’s second-largest NBFC, managing assets worth approximately ₹2.81 trillion as of September. Over nearly five decades, the company has evolved through mergers, strategic realignments and portfolio reshaping.

In recent years, it has diversified beyond traditional vehicle finance into renewable energy, supply chain finance, merchant credit and newer MSME segments, while monetising non-core assets such as its housing finance arm.

PL View

PL Capital maintains a BUY rating on Shriram Finance with a target price of ₹1,060. The MUFG deal is expected to lift the company’s capital adequacy ratio by about 15 percentage points to ~36%, providing long-term growth capital and improving balance-sheet resilience. While near-term RoE may moderate around 12% by FY28E, the underlying return on assets remains healthy at ~3.1%, underscoring the company’s strong core profitability.

PL believes the transaction reinforces confidence in Shriram’s franchise and positions it well for a potential rating upgrade and sustainable expansion across key lending segments.

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