Shriram Finance board meet on Friday likely to finalise MUFG deal

Vehicle financier Shriram Finance’s board of directors will meet on Friday, most likely to consider an equity stake sale to Japanese banking giant Mitsubishi UFG Financial Group (MUFG).

In a late-night stock exchange disclosure, the company said its board will meet to consider raising funds by way of a rights issue, preferential allotment, qualified institutions placement, or any other permissible mode.

The board could also give notice to seek shareholders’ approval for the same through a postal ballot and/or an extraordinary general meeting, the company said.


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ET had reported that MUFG is in advanced talks to take a 20% stake in India’s second-largest non-banking finance company (NBFC), Shriram Finance, for about Rs 23,200 crore ($2.6 billion), in its October 1 edition.

The move underscores heightened interest from Japanese financial services corporations in Indian banks and shadow lenders. It follows Sumitomo Mitsui Banking Corp taking a 24% stake in Yes Bank earlier this year.

If a deal takes place, this will be the largest foreign direct investment (FDI) in the Indian NBFC space to date. Both sides have signed an exclusivity agreement for negotiations, ET had said.

The investment by MUFG will be through a primary issuance and will not entail any secondary sale of shares. The Japanese bank is, however, not averse to taking a higher stake in the NBFC, even a controlling interest, over a period of time, the people said. In such an eventuality, it would have to launch an open offer.

The promoters own 25.39% of Shriram Finance, the bulk of which is held through group holding company Shriram Capital, which has a 17.85% stake. The rest is owned by public and institutional shareholders, including the Government of Singapore (5.41%) and the Monetary Authority of Singapore (1.2%).

Shriram Capital is owned by Shriram Ownership Trust and Sanlam of South Africa. Shriram Capital also has a stake in the parent’s insurance joint venture with Sanlam.