New Delhi: Japan's Mitsubishi UFJ Financial Group Inc (MUFG) proposal to acquire a 20 per cent stake in non-bank lender Shriram Finance for Rs 39,618 crore (around USD 4.4 billion) will enhance its capital adequacy ratio to 31 per cent. The Capital to Risk-Weighted Assets Ratio (CRAR), indicating capital as a percentage of risk-weighted credit, of the second biggest NBFC firm stood at 20.68 per cent at the end of September 2025.
Besides, it would also lead to rating upgrades by various rating agencies resulting in cheaper resource mobilisation for lending. The rating upgrade from AA+ to hopefully AAA could lead to 50-70 basis points reduction in cost of borrowing over a period of time, Shriram Finance executive vice chairman Umesh Revankar told reporters here.
"It happens over a period of three to four years as and when the liability is matured and the incremental borrowing is at cheaper cost. The benefit will be seen by the company," Shriram Finance MD and CEO Parag Sharma said. As far as capital adequacy ratio is concerned, Revankar said, this would go up to 31 per cent providing enough strength to expand the company's lending capacity.
Asked if the company has any plans to enter into the banking space, he said, "there is no such plan at the moment as we have enough scope and opportunity to grow in the existing line of business itself." Shriram Finance offers a wide range of products including commercial vehicle loans, MSME loans, tractors & farm equipment, gold loans, personal loans, and working capital loans, across its 3,225 branches.
It has 78,833 employees,and serves 96.6 lakh customers. On Friday, MUFG announced to acquire a minority stake of 20 per cent in non-bank lender Shriram Finance Ltd for Rs 39,618 crore (around USD 4.4 billion), marking the largest cross-border investment in India's financial sector to date. The proposed investment by MUFG Bank is subject to shareholder approval, regulatory clearances and customary closing conditions. The Indian financial services firm said it would issue 47.11 crore shares at Rs 840.93 per unit to the Tokyo-based MUFG Bank.
Upon completion of the investment, MUFG plans to appoint two directors to Shriram Finance's board. Speaking to the media, MUFG Senior Managing Corporate Executive Group COO & Group Head, Global Commercial Banking Business Group Yasushi Itagaki said the Japanese entity which is going to pick a 20 per cent strategic minority stake in the NBFC firm would not continue with the same brand name.
The Tokio-based bank, he said, would continue to serve its customers in India in wholesale and corporate segments through its branches and not explore the subsidiary model. MUFG Bank currently has six branches across the country including one at IFSC GIFT city, Gandhinagar, Gujarat. Asked about expansion plans, Revankar said some of the fund would go towards opening new branches and conversion of existing rural satellite offices to a branch.
Over the next two years, "we will open 100 new branches per annum which will generate 3,000 to 5,000 fresh employment," he said. Sharma further said, "Apart from new branches we have 550 rural centres. We will either consolidate or convert to a full-fledged branch over a period of time. Doesn't happen immediately. It takes a longer time. We feel around 50 to 75 such rural centres get converted to a branch every year. We try to accelerate it if the volume growth is much larger," Sharma said. On loan growth, Revankar said the company anticipated about a 20 per cent increase on an annual basis. Following the GST cut effective September 22, Shriram Finance has seen 20-25 per cent growth in vehicle finance.
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