In a landmark deal for India's financial sector, Japan's Mitsubishi UFJ Financial Group (MUFG) Bank is set to make the single largest foreign direct investment (FDI) in an Indian financial services company. The board of Shriram Finance Ltd (SFL) has approved a proposal to raise Rs 39,618 crore (approximately $4.4 billion) from MUFG Bank through a preferential allotment of equity shares.
A Strategic Partnership for Market Leadership
This colossal investment will grant MUFG Bank, Japan's largest bank, a 20% stake in Shriram Finance on a fully diluted basis. The transaction is a strategic move that combines Shriram Finance's formidable domestic franchise and extensive distribution network with MUFG's global financial strength and international expertise. For MUFG, this provides a powerful foothold in India's vast and fast-growing retail financial services market.
Umesh Revankar, Executive Vice Chairman of Shriram Finance, hailed the deal as a defining moment. He stated that MUFG's entry as a key investor reinforces global confidence in both India's financial services sector and Shriram Finance's leadership within it. The partnership aims to build a future-ready institution anchored in robust governance and trust.
Context and Significance of the Mega-Deal
This investment represents the biggest commitment by a Japanese bank in India, surpassing the April 2024 deal where SMBC acquired a 20% stake in Yes Bank for about Rs 13,483 crore. The move underscores a clear trend: with domestic growth in Japan constrained by low interest rates and demographic challenges, its major lenders are increasingly turning to India's expanding credit market, rising consumption, and clearer regulatory environment.
The capital infusion is expected to significantly bolster Shriram Finance's capital adequacy, strengthen its balance sheet, and provide long-term growth capital to fuel expansion across various lending segments. Furthermore, the collaboration is anticipated to unlock synergies in technology, innovation, and customer engagement, while improving access to low-cost funding.
Profiles of the Powerhouses
Shriram Finance, the flagship of the Shriram Group, is India's second-largest retail Non-Banking Financial Company (NBFC) by assets under management. Established in 1979, it is a market leader in financing pre-owned commercial vehicles and two-wheelers, primarily serving small business owners and transport operators. The company boasts assets under management of over Rs 2.81 lakh crore, operates through 3,225 branches, employs nearly 79,000 people, and serves about 96.6 lakh customers. For FY25, it reported a net profit of Rs 9,761 crore.
MUFG Bank, Japan's largest bank, is part of the Mitsubishi UFJ Financial Group, a global financial conglomerate. MUFG has had a presence in India for over 130 years, with prior investments totaling around $1.7 billion and a workforce of nearly 5,000 in the country. The proposed investment in Shriram Finance will be MUFG's largest in India to date, reinforcing its long-term commitment to the region.
Hironori Kamezawa, Group CEO of MUFG, expressed pride in the strategic partnership, emphasizing shared vision and values. He stated MUFG's commitment to supporting Shriram Finance's growth and contributing to India's economic development.
The proposed minority investment is subject to approvals from shareholders, regulatory clearances, and other customary closing conditions. Once completed, this deal will not only cement Shriram Finance's market position but also stand as a testament to the robust growth prospects and attractiveness of India's financial services landscape to global investors.
