Shriram Finance Limited (SHFL), one of India’s largest non-banking financial companies (NBFCs), has raised its medium-term growth outlook following a substantial capital infusion from Japan’s MUFG Bank, alongside a recent credit rating upgrade that is expected to lower borrowing costs.
On 19 December 2025, SHFL’s board approved a ₹396 billion investment from MUFG Bank, which will acquire a 20% stake in the company on a fully diluted basis. The investment values SHFL at around 1.9 times its post-money price-to-book value. MUFG will subscribe to 471 million shares at a price of ₹841 per share, marking one of the largest foreign investments in India’s NBFC sector.
The transaction also introduces tighter governance structures. Under a shareholders’ agreement, entities linked to the Shriram promoter group will be bound by non-compete and non-solicitation clauses covering SHFL’s lending and credit businesses. Subject to shareholder approval, MUFG will pay a one-time non-compete fee of $200 million. Separately, Shriram Capital, the promoter entity, has indicated that it is exploring restructuring options, including the potential separation of its lending operations from other business interests.
MUFG will gain greater involvement in SHFL’s strategic direction. Upon completion, the Japanese lender will be entitled to nominate two non-executive directors to the board and place up to three senior personnel in management roles for a transitional six-month period. Both parties have also agreed to explore future business opportunities through a non-binding memorandum of understanding.
Analysts say the capital infusion will significantly strengthen SHFL’s balance sheet and capital adequacy, providing long-term funding to support growth. The partnership is also expected to unlock synergies in technology, innovation and customer engagement, while improving access to lower-cost liabilities.
These benefits are likely to be reinforced by a recent credit rating upgrade. On 29 December 2025, CARE Ratings upgraded SHFL’s non-convertible debentures and subordinated debt to CARE AAA with a stable outlook. Management expects this to reduce the company’s cost of funds by around 100 basis points over the next two to three years, as more than half of its liabilities are repriced.
With operating leverage improving and credit costs expected to remain below 2%, SHFL’s return on assets is projected to rise by 40–50 basis points to over 3.3% by FY27–28. Net interest margins are also forecast to stabilise at around 9.7%.
Despite already trading at about two times its projected September 2027 book value, analysts believe SHFL remains attractively valued, supported by improving rural cash flows, rising demand for used vehicles, and a normalisation in credit costs. The stock’s target price has been raised to ₹1,200, with a “Buy” recommendation maintained.
