Shriram-MUFG deal: What proxy firms say

As the extraordinary general meeting for Mitsubishi UFJ Financial Group's (MUFG's) proposed investment in Shriram Finance draws closer, rating agencies and proxy firms have divergent views on what's good for the company, and ultimately, its shareholders.

- Agnidev Bhattacharya [e-mail]

MUFG's proposed investment in Shriram Finance is touted as India's largest cross-border deal in the financial sector.

(REUTERS)

Touted as India's largest cross-border deal in the financial sector, the $4.4 billion transaction has been given a thumbs up by credit rating agencies such as Care Ratings, Icra, and Moody's Ratings, putting the NBFC (non-banking financial company) in a favourable position to secure cheap borrowing. However, the deal has faced scrutiny from two prominent proxy advisors.

The NBFC is seeking shareholder nod for three resolutions:

Issuance of 471 million shares worth ₹39,618 crore to MUFG via preferential issue on a private placement basis.

Granting certain controlling rights to MUFG Bank.

A onetime, nonrecurring $200 million payout by MUFG to promoter Shriram Ownership Trust, for non-compete and non-solicit obligations.

Governance research firm Stakeholders Empowerment Services (SES) has opposed all three proposals, and Institutional Investor Advisory Services has opposed the third one. InGovern Research Services has backed all resolutions to clear the deal.