MUFG Makes Mega India Bet, Buys 20% Stake in Shriram Finance for INR 39,600 Crore

In a deal for $4.4 billion (INR 39,600 crore), Japan's Mitsubishi UFJ Financial Group announced on December 19 that it had acquired a 20% share in Shriram Finance through preferential share allocation. This represents the biggest foreign direct investment in India's financial industry. Two nominee directors for the Shriram Finance board may be appointed by MUFG.

According to media outlets, MUFG plans to purchase 47.11 crore equity shares at the floor price of INR 840.83 per share for the preferential issue. Prior to Emirates NBD's INR 26,850-crore deal for RBL Bank, Sumitomo Mitsui Banking Corporation's INR 14,043-crore investment in Yes Bank, International Holding Company's approximately INR 8,850-crore investment in Sammaan Capital, and Warburg Pincus and ADIA's INR 7,500-7,700 crore infusion into IDFC First Bank, the Shriram Finance transaction, valued at INR 39,618 crore, is the largest investment in India's financial services industry.

Deal to be Largest FDI in India’s Financial Services Sector

According to an official press release, when the agreement is finalised, it will be the biggest foreign direct investment in India's financial services industry, highlighting the rising trust that international investors have in India's lending and financial ecosystem. The company works through a nationwide network of 3,225 branches and has about INR 2.81 trillion in assets under management. MUFG Bank's proposed minority investment is contingent upon regulatory clearances, shareholder approval, and other normal closing conditions.

According to the statement, the deal, which entails the primary issue of equity shares, will greatly increase Shriram Finance's capital base, enhance the stability of its balance sheet, and supply long-term growth capital to support business expansion across loan sectors.

Umesh Revankar, Executive Vice Chairman of Shriram Finance, commented on the deal, saying it is a significant turning point in the company's development and shows international trust in both Shriram Finance's leadership role and India's financial services industry. He went on to say that the collaboration with MUFG would support the development of a future-ready organisation based on financial inclusion and trust, as well as the strengthening of competences and governance standards.

Advisors for the Deal

In addition to JP Morgan, KPMG India Corporate Finance is serving as MUFG Bank's primary financial advisor. AZB & Partners and Nishimura & Asahi are MUFG Bank's legal consultants, and Wadia Ghandy & Co. is advising Shriram Finance.MUFG was pleased to join the transaction and become a strategic partner of one of the most reputable financial institutions in India, according to Hironori Kamezawa, Group Chief Executive Officer of Mitsubishi UFJ Financial Group.

He said that MUFG and Shriram Finance have a same objective for long-term, sustainable growth and that MUFG would use its worldwide reach to help Shriram Finance grow and promote Indian communities and the country's economy.