Earnings upgrade ahead for Shriram Finance after MUFG deal

Japanese lender MUFG Bank will invest 39,620 crore in Shriram Finance Ltd (SFL) through preferential allotment of equity shares, at 841 per share at a post-money valuation of 1.8 times price-to-book value.

- DEVANGSHU DATTA

The deal will strengthen Shriram Finance’s capital base, improve its balance sheet resilience and provide long-term growth capital. This is about 66 per cent of September 2025 net worth and the largest foreign direct investment (FDI) deal in the banking, financial services and insurance (BFSI) sector. On conclusion of the deal, the promoter stake will fall to 20.3 per cent vs 25.4 per cent in September 2025, despite no stake sale from the promoter.

MUFG Bank is Japan’s premier bank, with a global network spanning around 50 countries. MUFG Bank’s parent is Mitsubishi UFJ Financial Group, Inc with a legacy of over 130 years in India. MUFG will hold 20 per cent of SFL and the net worth will be boosted by 66 per cent on completion of the deal.

‘The Tier-I capital adequacy ratio will increase by at least 1,100 basis points to 31 per cent from around 20 per cent. Capital adequacy ratio may see a boost of up to 15 per cent post the equity infusion with Tier-I rising to 36 percent. There will very likely be a rating upgrade.