In the single largest foreign direct investment (FDI) into an Indian financial services company, the board of Shriram Finance Ltd (SFL) has approved a proposal to raise Rs 39,618 crore ($4.4 billion) from Japan’s MUFG Bank Ltd through a preferential allotment of equity shares. This will give the Japanese lender a 20 per cent stake in SFL on a fully diluted basis.
The transaction gives MUFG Bank, Japan’s largest bank, a strong foothold in the retail financial services in the country. Shriram Finance, which has a market capitalisation of Rs 1.69 lakh crore, reported a net profit of Rs 9,761 crore for FY25.
This is the biggest investment by a Japanese bank in India after SMBC, part of the Sumitomo Mitsui Financial Group (SMFG), acquired a 20 per cent stake in Yes Bank for about Rs 13,483 crore (around $1.6 billion) in April 2024. The investment allows SMBC to raise its holding to 24.99 per cent without being classified as a promoter.
With domestic growth constrained by prolonged low interest rates and an ageing population, Japanese lenders are increasingly turning to India’s fast-expanding credit market, rising consumption and improving regulatory clarity.
In another mega deal in the financial sector, Abu Dhabi’s International Holding Company (IHC) recently agreed to buy a stake in Sammaan Capital valued at around Rs 8,850 crore (about $1 billion).
The latest deal brings together south-based Shriram Finance’s strong domestic franchise and wide distribution network with MUFG Bank’s global scale, financial strength and international expertise. The capital infusion is expected to significantly bolster SFL’s capital adequacy, strengthen its balance sheet and provide long-term growth capital to support expansion across lending segments. The partnership is also likely to unlock synergies in technology, innovation and customer engagement, while improving access to low-cost funding and potentially strengthening the company’s credit profile.
SFL said the collaboration would help align its governance and operational practices with global best standards.
The transaction underscores MUFG’s growing confidence in India’s financial services sector. Mitsubishi UFJ Financial Group (MUFG), the parent of MUFG Bank, has a presence in India spanning more than 130 years and has invested about $1.7 billion in the country, employing nearly 5,000 people. The proposed investment in Shriram Finance will be MUFG’s largest in India to date, reinforcing its long-term commitment to financial inclusion and sustainable growth, it said.
Umesh Revankar, Executive Vice Chairman of Shriram Finance, described the deal as a defining moment in the company’s growth journey. “MUFG is one of the world’s largest financial institutions, with a strong international network and values rooted in inclusive growth. Its entry as a key investor reinforces global confidence in India’s financial services sector and in Shriram Finance’s leadership within it,” he said, adding that the partnership would help build a future-ready institution anchored in trust and strong governance.
Shriram Finance said the investment further cements its position as India’s second-largest retail NBFC by assets under management and represents a significant milestone for the domestic financial services industry. It reflects confidence in the sector’s fundamentals and long-term growth prospects, while strengthening SFL’s capital base and accelerating its expansion plans.
The proposed minority investment by MUFG Bank is subject to shareholder approval, regulatory clearances and customary closing conditions.
Hironori Kamezawa, Group CEO of Mitsubishi UFJ Financial Group, said MUFG was proud to enter into a strategic partnership with Shriram Finance. “MUFG and Shriram Finance share a common vision and aligned values. Leveraging our global capabilities, we are committed to supporting Shriram Finance’s growth and contributing to economic development and communities in India,” he said.
Shriram Finance is the flagship company of the Shriram Group, which has a strong presence across credit, insurance, asset management, wealth management, asset reconstruction and stock broking. Established in 1979, the company serves small road transport operators and small business owners, and is a market leader in financing pre-owned commercial vehicles and two-wheelers. It has assets under management of over Rs 2.81 lakh crore, operates through 3,225 branches, employs nearly 79,000 people and serves about 96.6 lakh customers.
MUFG Bank is Japan’s largest bank, with a global network spanning around 50 countries, offering a wide range of commercial and investment banking services worldwide. Its parent, Mitsubishi UFJ Financial Group, is one of the world’s leading financial conglomerates, with operations across banking, securities, asset management and consumer finance, and a presence in more than 50 countries.
