Shriram Finance to sell 20% stake to Japan's MUFG in ₹39,617 crore deal

Economic Times
Economic Times
7m ago
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Shriram Finance will sell a 20% stake to MUFG Bank for ₹39,617 crore, pending approvals, with minority protections and a non-compete fee included.
Shriram Finance to sell 20% stake to Japan's MUFG in ₹39,617 crore deal
A What happened
Shriram Finance's board approved a preferential equity issuance of 47.11 crore shares at ₹840.93 each to MUFG Bank, resulting in a 20% minority stake acquisition worth ₹39,617 crore. The deal is the largest foreign investment in India's financial services sector and requires approvals from shareholders, RBI, and the Competition Commission. MUFG will receive minority protection rights like board nominations and pre-emptive rights, expiring if its stake drops below 10%. Additionally, MUFG will pay $200 million as a non-compete fee to Shriram's promoter entity. The promoter Shriram Capital is considering restructuring its lending business, but no final decision is made yet.
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Key insights

  • 1

    Shift in foreign investment in Indian financial sector: This transaction represents the largest foreign investment in India's financial services sector, signaling increased international confidence in India's financial market growth potential.

  • 2

    Minority investor protections reflect evolving governance: Granting MUFG rights like board nominations and pre-emptive rights indicates Shriram Finance's move toward accommodating large minority stakeholders amid globalization and cross-border partnerships.

  • 3

    Potential restructuring signals strategic refocus: Shriram Capital's intent to explore separating its lending business suggests strategic repositioning to enhance business efficiency or unlock value, reflecting common trends in large financial firms adapting to competitive pressures.

Takeaways

Shriram Finance's deal with MUFG marks a significant foreign investment milestone while triggering governance and strategic considerations that may influence India's financial sector landscape.

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