Shriram Finance expects 30-40 bps lower NCD rates after rating upgrade

However, the lender is not in a hurry to raise funds till the end of FY26, as it awaits $4.4 billion capital from MUFG to come in

Following the upgrade to ‘AAA’, Shriram Finance’s cost of funds on fresh non-convertible debentures (NCD) issuances could fall below 8 per cent, giving it a 30–40 basis points advantage over its current issuance rates.

 

However, the lender is not in a hurry to raise additional funds until the end of the current financial year (FY26), as it is awaiting capital infusion from MUFG Bank, which is expected to take three to four months, said Umesh Revankar, executive vice-chairman of Shriram Finance to Business Standard.

 

“We are not in a hurry to raise resources at this stage because we first need clarity on the timing of the capital infusion. Depending on when the funds come in, we may stagger our borrowings accordingly. Our expectation is that the capital will take three to four months, and if it comes a little earlier, possibly before the end of the year, we will plan our borrowings for the next year. For the current year, however, we are not in any rush,” Revankar said.

 

Care Ratings upgraded the credit rating on Shriram Finance's non-convertible debentures and subordinated debt worth to “CARE AAA; stable” from “CARE AA+; stable”. According to the rating agency, the upgrade was based on recent developments, including the company’s operational and financial performance for FY25 (audited) and H1 FY26 (unaudited), and the likely impact of these factors on its overall credit profile.

 

“In India, the re-rating typically happens instrument by instrument—starting with NCDs and then possibly extending to deposits. So, it is a process, and that process will continue. I can only say that this process is positive for us. The NCDs will see some re-rating, and any fresh issuance will be at a lower rate. Incrementally, NCDs are currently being issued at 8.3–8.4 per cent, and this will start coming down further. It should begin to move below 8 per cent,” Revankar said.

 

Earlier this month, Japan-based MUFG Bank, a consolidated subsidiary of Mitsubishi UFJ Financial Group (MUFG), said it will invest ₹39,618 crore (about $4.4 billion), the largest foreign direct investment (FDI) ever in an Indian financial services company, to acquire a 20 per cent stake in Shriram Finance on a fully diluted basis through a preferential issue of equity shares.

 

The MUFG Bank investment is expected to boost the lender’s capital adequacy, strengthen its balance sheet, and provide long-term growth capital. Additionally, it is also expected to improve access to low-cost liabilities, and improve credit ratings.

 

Shares of the lender closed 2.5 per cent higher than previous day’s close at ₹980.20, following the rating upgrade by Care Ratings. The shares of the lender have risen over 69 per cent in the current calendar year.