MUMBAI: Japanese financial giant Mitsubishi UFJ Financial Group (MUFG) is set to snap up a 20% stake in Shriram Finance, country’s the largest vehicle financing focused non-banking firm, for likely valuation of a whopping $4-billion-plus or nearly Rs 40,000 crore, making it the largest ever transaction in the domestic financial services space, through a fresh equity capital infusion, according to sources familiar with the development.
A formal announcement in this regard is slated for next Monday in New Delhi, after the managements of both the companies meet the top government ministers. A board meeting is slated for Friday.
The deal will make it the largest ever transaction in domestic financial services space, eclipsing the $3 billion investment made by Emirates NBD in RBL Bank in August for a 60% stake, and another Japanese giant Sumitomo Mitsui Banking Corporation (SMBC) acquisition of 24.2% in Yes Bank for almost $2 billion. This also makes the largest M&A in the country in the outgoing year.
The transaction, if consummated, also cements the Japanese financial companies’, which are facing growth stagnation and a decade of negative interest rates-- growing interest in fast growing markets like ours.
On Tuesday, Shriram Finance had informed stock exchanges that its board would meet Friday to consider raising funds through a rights issue, preferential allotment of shares, QIP or through other permissible modes.
Currently, the promoters--Shriram Capital--holds 25.4% stake in Shriram Finance, with the rest held by the public.
Though a press invite sent out Thursday does not specify the agenda of the meeting, except saying to announce “a strategic business plan,” a source aware of the development confirmed to TNIE that the presser is for a formal announcement of the transaction that will see the Shriram group selling 20% of their 25.4% holding held through Shriram Capital, in the second largest non-banking company by way of loan book, after Bajaj Finance, to the Japanese major MUFG.
Facing a shrinking domestic market and almost a decade of rock-bottom interest rates, Japan's biggest banks have for years sought out overseas targets.
Rival Sumitomo Mitsui Banking Corporation holds a 24.2% stake in private sector lender Yes Bank (it could buy only so much as the RBI was not agreeing for higher stake holding as the regulation caps voting rights at 26% only). SMBC also has full control of a non-banking finance firm—Fulletron India—which is now known a SMFG India Credit Co.
Another Japanese financial services player in the company is Nippon, which has three entities here—bought through the acquisition of Reliance Capital’s life and general insurance and also the AMC arms—Nippon Life, Nippon General Insurance and Nippon Life AMC.
“The capital infusion is expected to be in the range of $4-4.5-billion,” valuing Shriram Finance close to its current market capitalisation of about $10 billion, in dollar terms, the source said, adding the Shriram management is likely to allow MUFG to increase the stake to 51% later.
The acquisition will be executed through a combination of preferential allotment and warrants, the source added.
However, the markets did not react to the news reports about a likely announcement on Monday and the Shriram counter closed with marginal gain of 0.43% to Rs 867.20 on the BSE and a market capitalisation of Rs 1.63 trillion on Thursday following the weakness in the broader market which closed in the red for the fourth consecutive day.
It can be noted that the Shriram Finance stock has appreciated over 38% in the past three months, outperforming the the Sensex which has returned about 3% gains during this period. So far in 2025, the stock has gained about 46%, making it among the best performers of the current year.
The source added that the proposed transaction will not trigger an open offer as mandated by the Sebi for listed companies, as the stake acquisition will be entirely through a primary issuance of shares.
It can be noted that the Piramal Enterprises had a 10% stake in the Shriram group which it exited in 2023.
Post-transaction, MUFG is likely to secure at least two board seats through nominee directors. The deal is coming at a time when there is a management transition at Shriram Finance. Parag Sharma was recently elevated as managing director and chief financial officer, to succeed its long-time chief executive Y S Chakravarthi. In addition, Subhashri Shriram, chief executive of the promoter entity Shriram Capital, is likely to join the board of Shriram Finance.