MUMBAI: The Chennai-based Shriram Group has made history by briniging the largest foregin direct investoment into the domestic finanicial sector, selling 20% of its holding in its flagship Shriram Finance for $4.4 billion (around Rs 39,618 crore) or Rs 840.83 a share to the Japanese financial giant Mitsubishi UFJ Financial Group.
Under the agreement, entered into by both the parties Friday, MUFG Bank will acquire 47.11 crore shares aggregating to 20% of the second largest domestic non-banking company which will issue these shares through a preferential allotment, marking the largest foreign direct investment in domestic financial sector, dwarfing the $1.8-billion deal struck by another Japanese bank—SMBC--for a 24.2% in Yes Bank earlier this year. It also eclipses the thusfar largest FDI in the financial services space clinched by Emirates NBD and RBL Bank in a $3 (Rs 26,850-crore) billion deal in August.
The other large deals in the domestic financial services space in recent months are the UAE-based International Holding Company’s Rs 8,850-crore investment in Sammaan Capital (foremerly Indiabulls Finance), the Rs 7,700 crore infusion by Warburg Pincus and ADIA into IDFC First Bank and Japan’s Mizuho Securities acquiring 60% stake in Avendus Capital from the US-based investment firm KKR for around $500 million this Wednesday.
The deal marks the largest foreign direct investment in the domestic financial services sector, underscoring the growing global investor confidence in the country’s lending and financial ecosystem.
It also shows how the Japanese financial gaints flushed with money but a stagnating home market following the decacdes of negative interest rates are looking at growth markets like ours for balancesheet expansion and faster growth.
Following the transction, Mitsubishi UFJ Financial Group will have the right to appoint two nominee directors on the board of Shriram Finance.
The floor price for the preferential issue has been set at Rs 840.83/share and MUFG will acquire 47.11 crore equity shares, Shriram Finance said in a statement.
Shriram Finance, which is owned by the Shriram group through Shriram Capital holds a 25.4% stake in Shriram Finance, with the rest held by the public. The non-banking lender had assets under management exceeding Rs 2.81 trillion as of the September quarter and operates through a nationwide network of 3,225 branches.
The proposed minority investment by MUFG Bank is subject to shareholder approval, regulatory clearances and other customary closing conditions, the company said in a statement Friday.
The transaction involves a primary issuance of equity shares and will significantly strengthen Shriram Finance’s capital base, improve its balance sheet resilience and provide long-term growth capital to support business expansion across lending segments, the release added.
Umesh Revankar, executive vice-chairman of Shriram Finance, said, “the investment marks a defining milestone in the company’s growth journey and reflects global confidence in both the country’s financial services sector and Shriram Finance’s leadership position.”
He further said the partnership with MUFG would help strengthen capabilities, improve governance standards and build a future-ready institution anchored in trust and financial inclusion
Hironori Kamezawa, chief executive of Mitsubishi UFJ Financial Group, said MUFG is proud to enter into the transaction and become a strategic partner of one of the most respected financial institutions here. He said MUFG and Shriram Finance share a common vision for sustainable growth and that MUFG would leverage its global capabilities to support Shriram Finance’s expansion and contribute to economic development and communities here.
Shriram Finance's shares rose 3% after the announcement.
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.
Piramal Enterprises had a 10% stake in the Shriram group which it exited in 2023.
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.