Shriram Finance: MUFG deal fuels stock surge as bank-status debate lingers
Shriram Finance: MUFG deal fuels stock surge as bank-status debate lingers
MUFG Bank to invest ₹39,620 crore in Shriram Finance, boosting capital and funding options as the NBFC stock hits fresh highs.
Shares of Shriram Finance surged after news that MUFG Bank will invest ₹39,620 crore in the NBFC via preferential allotment of equity shares, a deal described as one of the largest foreign investments in India's BFSI space this year. The stock touched an intraday record high of Rs 983.35 before settling 1.63% higher at Rs 973.60.
The investment will strengthen Shriram Finance's capital base and balance sheet, widening its funding options and potentially supporting faster growth. The transaction places Shriram Finance's post-money valuation at about 1.8 times its price-to-book value, and will reduce the promoter stake from 25.4% to about 20.3%.
MUFG will buy shares at around ₹841 apiece, at a discount to the previous close. This infusion is expected to diversify funding and deepen capital markets access, which could lower the cost of funds.
Umesh Revankar, Executive Vice Chairman, said MUFG has seen the business and is impressed with the direct reach and customer-centric infrastructure; there was no discussion about turning Shriram into a bank via the NBFC route, despite ongoing speculation about such a transition.
Analysts note potential benefits in a credit-rating upgrade: improved access to lenders that typically work with top-rated borrowers could reduce liability costs, currently around 8.8%, by 40 basis points initially and up to 100 basis points over 24 months as funding sources broaden.
