MUMBAI, Dec 19 : Japan’s MUFG will acquire a 20 per cent stake in Shriram Finance Ltd (SFL) for $4.4 billion, the Indian non-bank lender said on Friday, marking the largest cross-border investment in India’s financial sector. The sector has struck deals worth nearly $15 billion so far this year, according to Dealogic data, more than double the $6.5 billion done in 2024. The deal comes close on the heels of Emirates NBD Bank’s $3 billion investment for a 60 per cent stake in Indian private lender RBL Bank in November, which was then the largest investment in the sector by a foreign bank. For years, Japan’s biggest banks have sought out overseas targets in the face of a shrinking domestic market and rock-bottom interest rates, with India becoming a popular destination due to its fast-growing economy. Rival Sumitomo Mitsui Banking Corporation, a unit of Sumitomo Mitsui Financial Group, bought a 24.2 per cent stake in Indian lender Yes Bank, starting with a 20 per cent stake for $1.6 billion in May.
Shriram Finance, owned 24.9 per cent by the Shriram Group, stated that the transaction is subject to regulatory approval.
The SFL board has also approved granting MUFG certain minority protection rights, including the right to nominate up to two non-independent directors on its board and pre-emptive rights to maintain proportional shareholding. These rights will lapse if MUFG’s stake falls below 10 per cent on a fully diluted basis, the company added.
MUFG will also have to pay a one-time non-compete and non-solicit fee of $200 million to SFL’s major shareholder Shriram Ownership Trust, subject to the non-bank lender’s shareholders’ approval.
Shriram Finance said the deal would improve its capital adequacy, bolster its balance sheet, and offer long-term growth capital. It will also aid in accessing low-cost liabilities and strengthening credit ratings, the non-bank lender noted.
Shares of Shriram Finance rose as much as 3.4 per cent to a record 898.85 rupees following the news. Since talks of the MUFG deal were first reported in early October, the non-bank lender’s shares have jumped about 46 per cent.
(Reporting by Gopika Gopakumar in Mumbai, Nandan Mandayam and Urvi Dugar in Bengaluru; Editing by Sonia Cheema and Muralikumar Anantharaman)