Mitsubishi UFJ to Acquire $4.4 Billion Stake in Shriram Finance

Mitsubishi UFJ Financial Group (MUFG) of Japan has declared a large project in the Indian finance sector which includes taking a 20% ownership in Shriram Finance, a non-banking financial firm, for $4.4 billion (₹39,618 crore). This investment has become the largest foreign direct investment (FDI) in India's financial sector.

MUFG will control the minority interest by means of preference shares with Shriram Finance coming up with 47.1 crores of shares each priced at ₹840.9. The pact also enables MUFG to nominate two members to SFL’s board and gives it a pre-emptive right to retain its percentage of ownership. However, these rights will be forfeited if MUFG's stake drops below 10% on a totally diluted basis.

According to Shriram Finance, their alliance will bring together MUFG's global financial know-how with their strong domestic network. The investment will not only improve SFL's capital adequacy, but it will also strengthen its balance sheet and support long-term growth. The access to low-cost liabilities is likely to improve; credit ratings may be lifted; and governance and operations brought up to global standards.

This transaction is a clear indication of India's growing appeal to global investors and at the same time, it represents the increasing flow of foreign direct investment into Indian finance sector.