Japan’s Mitsubishi UFJ Financial Group is nearing an agreement to acquire a 20% stake in Shriram Finance Ltd., Nikkei reported, in what would mark one of the largest foreign investments in India’s shadow banking sector.
MUFG plans to invest approximately ¥600 billion ($3.9 billion) through a third-party share issuance, with the Japanese bank expected to classify the Mumbai-based lender as an equity-method affiliate. A final decision on that designation is anticipated soon.
The transaction underscores Japanese megabanks’ growing appetite for India’s credit markets as domestic growth opportunities at home remain constrained. Sumitomo Mitsui Financial Group completed a landmark acquisition of a stake in Yes Bank earlier this year, deploying nearly $5 billion in the country.
Shriram Finance operates across urban and rural India, providing loans for commercial vehicles, tractors, passenger cars, and small businesses. The company has seen its shares climb roughly 50% this year, giving it a market capitalization of about $18 billion.
For MUFG, the investment represents a cornerstone of its broader Asia expansion, targeting rising demand from individuals and small enterprises in the world’s most populous nation. Whether the premium valuation proves justified will depend on Shriram’s ability to maintain asset quality as the Indian economy navigates higher interest rates and increasing regulatory scrutiny of nonbank lenders.
