‘MUFG deal a huge endorsement of India’s progress’: Shriram Finance

The rush of foreign money into Indian lending comes at a time when foreign direct investment (FDI) into India has weakened, with 2024-25 seeing net FDI inflow of less than $1 billion amid rising repatriation of funds by foreign investors and increasing overseas investments by Indian companies. In the first seven months of 2025-26, net FDI into India stood at $6.20 billion.

Shriram Finance’s stake sale to MUFG Bank – whose parent is the Mitsubishi UFJ Financial Group – is subject to shareholder and regulatory approvals. According to officials, the deal may be completed by April-May 2026.

Revankar said the deal with MUFG “should change (the FDI trend). It’s a huge (sign of) belief in the Indian economy… Since it’s the fastest growing large economy, more capital will come to India”.

According to Yasushi Itagaki, MUFG’s Senior Managing Corporate Executive and Group COO-I & Group Head, Global Commercial Banking Business Group, India is the Japanese firm’s “most strategically important key market” among Asian countries “given the strong potential for enduring economic growth”. The investment will help MUFG establish a “solid business foundation” in India’s Small and Medium Enterprises and retail sectors and “capture the country’s growing domestic demand”.

Minority stake only, focus on existing business

Although Reuters reported last week, quoting MUFG officials, that there is a chance “we may push our stake above 50 per cent” as Indian regulations permitted the same, Revankar said on Monday that the Japanese bank wants to be a minority shareholder and “we have never discussed anything beyond that”.

Itagaki, meanwhile, said MUFG first needs to “digest” its investment in Shriram Finance and for the time being it will be focused on ensuring “the delivery of this partnership into reality”. “Although we have a very long-term strategic view to support Shriram Finance, our priority is to stay focused on realising the value…as a minority stakeholder in Shriram Finance.” Apart from Shriram Finance, for the moment, “we have no appetite in further expanding our investment in India’s financial services segment”, Itagaki added.

While the MUFG investment offers plenty of money for growth to Shriram Finance – its capital adequacy ratio is expected to rise to around 31 per cent from 20.68 per cent once the funds are received – the Chennai-based lender is not looking to move away from its existing customer base and business segments, with Revankar saying there was no intention to get into new areas, something which MUFG appreciates.

As at the end of September, Shriram Finance had almost 97 lakh customers and assets under management of Rs 2.81 lakh crore. Commercial vehicle loans made up 46 per cent of its book, passenger vehicle loans accounting for another 21 per cent and the share of loans to Micro, Small, and Medium Enterprises (MSMEs) being 14 per cent. It reported a net profit of Rs 2,307 crore for July-September, up 11 per cent year-on-year.

When asked about applying to become a bank, Revankar said the subject was “not a discussion at all”. “Even MUFG, they want us to service our constituency, the underbanked and unbanked. We would like to remain there. We feel that there is enough opportunity for growth…in the constituency that we have built, which is vehicle (loans) and SMEs to expand our loan book… Right now, I don’t see any distinct advantage (in getting a banking licence) for serving our existing customer base.”