At $4.4 bn, Shriram Fin to get India's largest financial-sector FDI

Japan's MUFG Bank can nominate two non-independent directors

- SUBRATA PANDA

Leading non-banking financial company (NBFC) Shriram Finance on Friday said Japan-based MUFG Bank would invest %39,618 crore, or $4.4 billion, to acquire a 20 per cent stake on a fully diluted basis through a preferential issue of equity shares.

‘This will be the largest foreign direct investment (FDI) ever in India’s financial services sector, which has seen a spate of large deals this year. The transaction will surpass Emirates NBD’s October deal to acquire a 60 per cent stake in RBL Bank for $3 billion. In May, Sumitomo Mitsui Banking Corporation (SMBC) signed a deal to buy a 20 per cent stake in Yes Bank for $1.6 billion.

Shriram Finance is the flagship company of the Shriram group and the country’s second-largest retail NBFC, with assets under management (AUM) exceeding 2.81 trillion.

Under the deal, MUFG Bank, a consolidated subsidiary of Mitsubishi UFJ Financial Group (MUFG), will be issued over 471 million shares at 840.93 apiece, translating into a 20 per cent stake. Following completion, MUFG Bank will have the right to nominate two non-independent directors to Shriram Finance's board.

The proposed minority investment is subject to shareholder approval, regulatory clearances, and customary closing conditions. “Upon completion of the deal, MUFG Bank would be classified as a public shareholder of the company,” Shriram Finance said.