Japan’s Mitsubishi UFJ Financial Group (MUFG), one of the world’s largest banks, is reportedly in advanced discussions to acquire a 20% stake in Shriram Finance Ltd for approximately ₹23,200 crore ($2.6 billion), according to a September 30, 2025, report by The Economic Times. The investment would be through a primary issuance via preferential allotment, with no secondary share sales involved, and both parties have signed an exclusivity agreement. While MUFG has declined to comment and Shriram Finance has denied knowledge of any majority stake sale in a stock exchange filing, the potential deal could represent the largest foreign direct investment (FDI) in an Indian non-banking financial company (NBFC) to date. Shriram Finance’s shares jumped nearly 4% to close at ₹617 on September 30, reflecting market optimism.
For investors tracking NBFC growth, global banking expansions, and India’s $500 billion lending market, this move underscores MUFG’s appetite for high-growth emerging markets, following its 23.62% stake in Morgan Stanley and recent backing of DMI Finance. Shriram Finance, with ₹2.72 lakh crore in assets under management (AUM) as of June 2025, is India’s second-largest NBFC after Bajaj Finance, focusing on retail lending like vehicle finance and MSMEs. Let’s break down the deal, Shriram’s profile, and what it means for the sector.
Deal Details: Primary Issuance at Record Valuation
The proposed transaction values Shriram Finance at around ₹1.16 lakh crore ($13.9 billion) at the current share price, with the 20% stake implying a premium for primary shares. Sources indicate MUFG is open to increasing its holding to a controlling interest over time, potentially through additional tranches. The exclusivity agreement signals negotiations are nearing completion, though Shriram’s filing emphasized no shareholder has approached for a majority sale.
Key aspects of the talks:
| Element | Details | Implications |
|---|---|---|
| Stake Size | 20% via primary issuance (preferential allotment) | Fresh capital for Shriram; no promoter dilution initially |
| Valuation | ₹23,200 crore ($2.6 billion) for 20% | Implies $13.9B enterprise value; 8.8x FY25 book value |
| Structure | No secondary sale; exclusivity signed | Focus on growth funding; regulatory approvals pending |
| Timeline | Advanced stage; potential close by Q4 FY26 | Subject to RBI/FEMA nods for FDI in NBFCs |
| MUFG’s Angle | Strategic entry into Indian retail lending | Builds on DMI Finance stake; targets 17% AUM growth |
Shriram Finance’s clarification in a late-night filing on September 30 stated it is “not aware of any potential majority stake sale” and no shareholder has expressed intent, but the report’s details suggest minority discussions are ongoing. MUFG, Japan’s largest bank by assets ($3.3 trillion), has been expanding in Asia, including a failed $2 billion bid for HDB Financial Services.
Shriram Finance’s Profile: Retail Lending Powerhouse
Shriram Finance Ltd, formed from the 2022 merger of Shriram City Union Finance and Shriram Capital, is a Chennai-based NBFC with a strong focus on underserved retail segments. It reported standalone profit of ₹21.56 billion in Q1 FY26, up 8.8% YoY but slightly below estimates, on ₹2.72 lakh crore AUM (17% YoY growth). Promoters hold 25.39% (down from 29.37% in 2022), with public float at 74.61%.
Financial snapshot (FY25):
| Metric | Value (₹ Cr) | YoY Growth | Notes |
|---|---|---|---|
| AUM | 2,72,000 | +17% | Vehicle finance (45%), MSME (14%) lead |
| Revenue | 28,000+ | +15% | Interest income dominates |
| PAT | 3,000+ | +20% | ROE at 16%; NIM 10.5% |
| Market Cap | 1.16 lakh | +5.85% YTD | Shares at ₹617 (Sep 30) |
With 3,225 branches (mostly semi-urban/rural), Shriram serves 10 million customers in vehicle, personal, and gold loans, positioning it for MUFG’s retail expertise.
Why the Deal? MUFG’s India Push and Shriram’s Growth
MUFG’s interest follows Sumitomo Mitsui’s $1.58 billion Yes Bank stake in 2025, highlighting Japanese banks’ bet on India’s 15% credit growth amid slowing domestic economies. Shriram gains capital for 20% AUM expansion to ₹3.26 lakh crore by FY27, funding MSME and EV lending.
Strategic fit:
- For MUFG: Access to India’s $500B retail NBFC market; synergies with DMI Finance.
- For Shriram: Tech from MUFG (e.g., digital lending); global credibility for IPO talks.
- Sector Boost: FDI influx (up 20% in 2025) amid RBI’s easing; peers like Bajaj (AUM ₹4.41 lakh Cr) set benchmarks.
Risks: Regulatory delays (FEMA/RBI approvals) and valuation negotiations; Shriram’s denial tempers immediacy.
Implications: Record FDI and NBFC Consolidation
A successful deal would be India’s largest FDI in an NBFC, surpassing HDB’s $2B talks, injecting $2.6B for growth amid 17% AUM rise. For investors, Shriram shares (up 4% to ₹617) signal upside; sector, more Japanese entries like SBI’s Bandhan stake. Global Angle: MUFG’s Asia focus counters Japan’s 1% growth.
If closed, it could pave Shriram’s IPO path at $15-20B valuation.
Conclusion: MUFG’s Shriram Stake – A $2.6B FDI Milestone?
Japan’s MUFG in talks for a 20% stake in Shriram Finance at ₹23,200 crore could be a record FDI, fueling the NBFC’s retail push amid 17% AUM growth. Despite Shriram’s denial, exclusivity hints at progress—watch for Q4 close. For India’s lending sector, it’s a vote of confidence in underserved finance. reuters
