Shriram Finance shares in focus ahead of board meet on MUFG’s $4.45 billion investment

Core Viewpoint - MUFG, Japan's largest bank, is set to acquire a 20% stake in Shriram Finance, valuing the company at Rs 1.63 lakh crore, making it the second-largest non-banking finance company (NBFC) in India after Bajaj Finance [1][5][6] Investment Details - The investment will amount to $4.45 billion (Rs 40,000 crore), with MUFG purchasing shares at Rs 842 each, representing a 3.44% discount to the previous closing price of Rs 869.20 [6] - The capital infusion will not involve any secondary sale of shares [1][6] Stakeholder Impact - Post-investment, MUFG will gain two board seats and may consider increasing its stake further, potentially leading to an open offer in the future [2][6] - The promoters, Shriram Ownership Trust and Sanlam of South Africa, will see their stake diluted from 25.39% to 20.05% due to the expanded capital base [5][6] Market Context - This deal follows MUFG's previous unsuccessful attempt to acquire a $2 billion stake in HDB Financial Services [5][6] - The Reserve Bank of India's recent clarification allowing banks to own equity in NBFCs has expedited this transaction, with discussions fast-tracked since June [5][6] Future Outlook - Industry observers believe this investment could act as a catalyst for a credit rating upgrade for Shriram Finance and may reduce borrowing costs by 50–60 basis points [5][6]