Mitsubishi UFJ Financial Group (MUFG) is set to acquire a 20% stake in Shriram Finance Ltd (SFL) for $4.4 billion, according to an announcement Friday from the Indian non-bank lender. The transaction marks the largest cross-border investment in India’s financial sector to date.
Japanese megabanks have for years looked abroad for growth opportunities, amid stagnating domestic markets and ultra-low interest rates. India has emerged as a favored destination for such expansion, thanks to its robust economic trajectory.
Shriram Finance, which is 24.9% owned by the Shriram Group, said completion of the MUFG transaction would be subject to regulatory approvals.
As part of the deal, SFL’s board approved minority protection provisions for MUFG, including the right to nominate up to two non-independent directors and pre-emptive rights to preserve its proportional holding. These rights will cease if MUFG’s share drops below 10% on a fully diluted basis, according to SFL.
MUFG will also pay a one-time non-compete and non-solicit fee of $200 million to SFL’s major shareholder, Shriram Ownership Trust, pending shareholder approval.
Shriram Finance said the deal will support its capital adequacy, strengthen the company’s balance sheet, and provide long-term growth capital. Access to lower-cost funding and enhanced credit ratings were also referenced as anticipated benefits.
Following the announcement, Shriram Finance shares rose as much as 3.4% to a record INR 898.85. Since reports of MUFG’s interest first surfaced in early October, the stock has surged about 46%, according to the company.
