MUFG Reportedly Nearing Deal to Acquire Stake in Shriram Finance

Mitsubishi UFJ Financial Group Inc. (MUFG) is reportedly on the verge of finalizing an agreement to purchase a minority stake in Shriram Finance Ltd., an Indian financial services firm. This move would mark the latest instance of a foreign bank seeking to expand its presence in India, now the world's most populous nation, according to sources familiar with the matter.

The potential investment from MUFG could exceed ¥500 billion, equivalent to $3.2 billion, for an approximate 20% stake in Shriram Finance. The sources, who requested anonymity due to the private nature of the discussions, indicated that negotiations are at an advanced stage, and a deal could be reached as early as this week. That said, the reality is a bit more complicated. they cautioned that specific details, including the final price and stake percentage, remain subject to change.

Shriram Finance, based in Mumbai, has witnessed its shares climb nearly 50% this year, resulting in a market capitalization of approximately $18 billion.

The sources also noted that the ongoing negotiations could still encounter delays or even collapse entirely. A representative for MUFG declined to comment on the matter, and Shriram Finance has yet to issue a statement.

Shriram Finance's operations span both urban and rural areas of India, with a focus on providing loans for commercial vehicles, tractors, passenger cars, and small and medium-sized enterprises (SMEs).

This potential investment follows a trend of Japanese banks investing in Indian financial institutions, driven by optimism regarding India's economic growth. Earlier this year, Sumitomo Mitsui Financial Group Inc. became the largest shareholder of Yes Bank Ltd. in a significant transaction. Sumitomo Mitsui is now actively working to increase lending and expand its workforce in India, having already invested nearly $5 billion.

The Economic Times previously reported MUFG's interest in acquiring a stake in Shriram back in October.