Japan’s largest bank group, MUFG Bank, is investing a huge amount of money—₹39,618 crore (about $4.4 billion) in Shriram Finance, an Indian non-banking finance company (NBFC). This is the biggest foreign investment ever in an Indian financial services company.
What does MUFG get?
After this deal MUFG will own 20% of Shriram Finance, becoming a strategic partner rather than a short-term investor. Promoters will own about 20.3% and public shareholders will own around 60%.
MUFG said it intends to remain a minority shareholder and has no plans to seek full control of Shriram Finance. The Japanese financial group aims to support the company by sharing its technology, risk management expertise, and global experience and network. MUFG also clarified that it is not considering investments in other NBFCs at present and will focus on strengthening and making this partnership successful.
What does Shriram Finance get?
- The extra money will increase the company’s capital strength (capital adequacy ratio) from about 21% to 31%.
- Better ability to lend more money and grow faster.
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Support from MUFG’s global experience, technology, and governance practices.
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Potential improvement in credit ratings, which helps lower borrowing costs.
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With better ratings, Shriram Finance can borrow money at lower interest rates in the future.
Why foreign investors matter?
This is important as:
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It shows global confidence in India’s lending sector.
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It proves Shriram Finance is seen as a strong and reliable company.
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MUFG’s biggest-ever investment in India highlights its belief in India’s long-term growth.
Even after getting so much money, Shriram Finance does NOT want to become a universal bank. The company believes it can grow well by continuing what it already does, mainly vehicle loans and retail financing.
Shriram Finance believes there is still strong and unmet demand for vehicle loans in India, which creates significant growth opportunities for the company. Because of this positive outlook, it has raised its growth expectations for its vehicle loan business and now expects it to grow at around 20% annually over the next four to five years, compared with its earlier estimate of 15% per year.
Shriram Finance’s shares jumped nearly 4% in a single day, and the stock has gained around 10% over the past week, indicating that investors have reacted positively to the deal and are confident about the company’s future prospects.
