Japan’s MUFG to invest $4.4 billion for 20% stake in Shriram Finance
MUMBAI: Mitsubishi UFJ Financial Group (MUFG) is preparing to invest ₹39,618 crore ($4.4 billion) for 20% Its stake in Shriram Finance Ltd marks one of the largest cross-border transactions this year and adds to the growing pipeline of deals in the India-Japan corridor. Shriram Finance shares hit a 52-week high.
The investment will be made through the issue of preference shares, Shriram Finance (SFL) said in a filing to the stock exchanges on Friday.
In the application, the company stated that the transfer of funds will increase SFL’s capital adequacy, strengthen its balance sheet and provide long-term growth capital. SFL said this collaboration is expected to improve access to low-cost liabilities while promoting sustainable growth by unlocking synergies in technology, innovation and customer engagement.
The transaction combines SFL’s established domestic franchise and extensive distribution network with the global expertise and financial strength of MUFG Banks.
Mint It reported on December 17 that MUFG plans to invest $4.5 billion-$5 billion for a 20% stake in SFL, valuing the company at $22 billion-$25 billion. Shriram informed the stock exchanges about the board meeting on Friday to discuss the proposal to raise funds through rights issue, preferential allotment, qualified institutional placement or any other method.
Momentum is being increased
MUFG’s investment in SFL has increased the momentum of activity in financial services in the Indo-Japan corridor. Notable transactions this year include Mizuho’s majority investment in Avendus and Sumitomo Mitsui Banking Corp’s acquisition of a stake in Yes Bank.
“MUFG’s entry as a major investor strengthens global confidence in India’s financial services sector,” Umesh Revankar, vice-chairman of SFL, said in a statement.
SFL shares rise 4.9% to 52-week high ₹It traded at 911.35 on Friday ₹Friday at 13:24 on 908.10. They increased by more than 50 percent this year. Acquisition – in a company valuation ₹1.98 trillion – representing a premium of approximately 16.5% to SFL’s current market cap.
For the Japanese entity, this investment is a strategic move to establish a foothold in India’s micro, small and medium enterprises (MSME) and retail markets and capture the country’s growing domestic demand.
“By providing growth capital to Shriram Finance, we will help expand in segments such as new commercial vehicles and MSME, while increasing funding capacity and profitability by improving creditworthiness,” MUFG said in a statement.
MUFG Group has a legacy of over 130 years in India and has already invested around $1.7 billion; The SFL deal was the biggest deal ever made in the country.
Some of the largest strategic transactions and deals of financial sponsors took place this year. Recent notable deals include Emirates NBD’s acquisition of a majority stake in RBL Bank in a $3 billion transaction, Tata Motors’ $4.5 billion acquisition of Iveco, Capgemini’s $3.3 billion acquisition of WNS Global Services, and Schneider Electric’s $6.4 billion deal involving Lauritz Knudsen Electrical & Automation.
Global private equity firm Blackstone purchased a 9.9% stake in Federal Bank for $705 million, while Abu Dhabi-based IHC, through its subsidiary Avenir Investment RSC Ltd, purchased a 43.46% stake in Samman Capital for $1 billion.
Strategic changes
SFL is India’s second largest non-banking financial company. ₹2.81 trillion as of September. According to its website, it has more than 3,000 branches across the country.
Founded in 1979 by R. Thyagarajan along with AVS Raja and T. Jayaraman as Shriram Transport Finance Company Ltd (STFC), the company went public about five years later. In the following years, it received investments from Telco (now Tata Motors) and Ashok Leyland.
Over almost fifty years, the company has gone through many changes and strategic changes, which led to the investment of the Japanese giant. Its journey dates back to the mid-2000s, when STFC merged with Shriram Industrial Holdings Limited (SIL) and Shriram Overseas Finance Limited (SOFL) and received investments from private equity firms such as ChrysCapital and TPG.
About three years ago, Shriram City Union Finance and Shriram Capital were merged into Shriram Transport Finance Company and renamed Shriram Finance. This entity sold an 84.4% stake in Shriram Housing Finance to a Warburg Pincus subsidiary. ₹3,929 crore in 2024.
The promoters own 25.39% of SFL, largely through group holding company Shriram Capital, which owns 17.85% stake. The remaining shares are held by public and institutional investors, including the Government of Singapore, which holds a 5.41 percent stake, and the Monetary Authority of Singapore, which holds a 1.2 percent stake. According to various reports, Shriram Capital is owned by Shriram Ownership Trust and South Africa’s Sanlam and also has a stake in the group’s insurance joint venture with Sanlam.
Mint Earlier this year, it had reported that the NBFC was realigning its lending strategy to focus on emerging segments such as renewable energy, trade credit, fisheries and supply chain finance due to slowing growth in vehicle financing. It has also forayed into trade finance through partnerships with Paytm and PhonePe. ₹100 crore and ₹50 crore per month respectively. It also funds merchants affiliated with Walmart’s Best Price.
SFL reported its total revenue: ₹41,859.47 crore in FY25, as compared to ₹34,997.61 crore a year ago. Net profit increased ₹9,761 crore ₹7,190.48 crore in FY24.
KPMG and JPMorgan were financial advisors to MUFG Bank. SFL’s legal counsel is Wadia Ghandy & Co. was.
