In a landmark deal that underscores the growing allure of India's financial services sector, Japan's Mitsubishi UFJ Financial Group (MUFG) is investing a massive $4.4 billion (approximately ₹39,618 crore) to acquire a 20% stake in Shriram Finance Ltd. The transaction, finalized this week, values the Chennai-headquartered non-banking finance company (NBFC) at a staggering ₹1.98 trillion ($23.5–24 billion).
Shriram Group Retains Firm Control Despite Major Investment
Despite the multi-billion dollar infusion, the founding Indian promoters will continue to hold the reins of the company. Executives from both sides clarified on Monday that the Shriram Group will maintain control over the board and management of Shriram Finance, which is India's second-largest NBFC by assets managed.
Parag Sharma, Managing Director & CEO of Shriram Finance, stated that MUFG will be classified as a minority public shareholder, with governance rights staying with the Indian conglomerate. Echoing this, Yasushi Itagaki, Senior Managing Corporate Executive at MUFG, expressed satisfaction with the 20% stake, which grants the Japanese bank the right to appoint two nominee directors but not operational control.
"This move is aimed at capturing domestic demand, particularly in the SME segment," Itagaki said. "Through this partnership, we aim to work across roads, infrastructure and value chains that underpin India’s growth."
Shareholding Reshuffle and Strategic Pivot
The investment will lead to a proportional dilution for existing shareholders. Prior to the deal, promoters and the promoter group held 25.3% of Shriram Finance, with public shareholders owning the remaining 74.7%. Post-transaction, the shareholding pattern will shift to: MUFG at 20%, other public shareholders at 59.7%, and promoters at 20.3%.
The deal comes at a time when Shriram Finance, with over 3,000 branches nationwide, is strategically diversifying its lending portfolio. With growth in its traditional vehicle finance segment slowing, the NBFC is pivoting towards new areas like renewable energy, merchant credit, fisheries, and supply chain finance. It has also entered merchant finance through partnerships with Paytm and PhonePe, disbursing about ₹100 crore and ₹50 crore per month, respectively, through these platforms.
A Milestone in India-Japan Financial Corridor
This transaction represents one of the largest cross-border deals in India this year and significantly boosts activity along the India-Japan financial services corridor. It follows other major deals like Mizuho's majority buyout of Avendus and Sumitomo Mitsui Banking Corp's stake purchase in Yes Bank in May.
For MUFG, one of the world's largest banks with a 130-year history in India, this is its largest investment in the country to date, bringing its total investment here to over $1.7 billion. The deal provides MUFG a substantial foothold in India's high-growth MSME and retail lending markets, leveraging Shriram Finance's extensive distribution network.
Shriram Finance reported a robust financial performance, with a total income of ₹41,859.47 crore and a net profit of ₹9,761 crore in FY25. Its managed assets stood at approximately ₹2.81 trillion as of September this year.
The MUFG-Shriram deal adds to a series of large strategic transactions in India in 2024, including Emirates NBD's agreement to acquire a majority stake in RBL Bank for $3 billion and Blackstone's purchase of a 9.9% stake in Federal Bank for $705 million, signaling strong global confidence in the Indian financial sector's long-term prospects.
