Shriram Finance shares touch all-time high after MUFG capital infusion

Shriram Finance shares rose to a record high after brokerages said MUFG Bank's proposed investment would sharply lift net worth, capital adequacy and support faster growth

Shares of Shriram Finance hit an all-time high on Monday, closing at ₹935.10, up 3.7 per cent from the previous close, as brokerages said the proposed capital infusion by Japan-based MUFG Bank would boost the lender’s net worth by about 66 per cent and raise its capital adequacy by over 10 percentage points to above 30 per cent. 

 

The finance company is also likely to see a rating upgrade — it is currently rated AA+, while most upper-layer NBFCs are rated ‘AAA’.

 

In the calendar year 2025, the stock has gained 62.1 per cent.

 

Shriram Finance’s management said at a press conference on Monday that the company’s cost of funds is expected to decline by 50–75 basis points over time as a result of the MUFG deal. Following the capital infusion, its capital adequacy ratio (CAR) is expected to rise to around 31 per cent, providing headroom for faster growth over the next few years, the management added.

 

“With MUFG’s equity capital infusion into Shriram Finance, assets under management (AUM) are likely to grow at a compound annual growth rate (CAGR) of 18 per cent over FY25-FY28, compared with a 16.5 per cent AUM CAGR estimated earlier. The company’s net profit is also expected to grow at a robust 25 per cent over the same period,” Motilal Oswal Financial Services said in a research report.

 

The report added that MUFG’s investment would support the company’s next phase of growth by providing long-term capital to accelerate expansion across core segments, including commercial vehicles and MSME lending.

 

Shriram Finance said it would deploy the fresh capital primarily to scale up its core businesses rather than enter new lending verticals. Its focus remains on vehicle financing — covering commercial vehicles, tractors, two-wheelers and passenger vehicles — and SME lending, where the Reserve Bank of India estimates a credit gap of about ₹40 trillion. The company expects a 20 per cent AUM CAGR over the next four to five years, driven by post-Covid economic recovery, delayed vehicle upgrades due to sharp price increases of 30–40 per cent following BS-VI norms, and rising rural and semi-urban demand.

 

The management said around 80 per cent of its business currently comes from semi-urban and rural areas, with plans to convert nearly 600 rural satellite centres into branches over the next few years.

 

ICICI Direct said in a report that the company’s small and medium enterprises (SME) segment is expected to grow at a steady 15-16 per cent, driven by its continued focus on the segment. “Margin tailwinds from easing cost of funds — supported by a potential credit rating upgrade — and stable asset quality are likely to provide incremental support to valuations following this transaction,” the report said. While return on equity (RoE) is expected to remain subdued at 12 per cent in FY28, return on assets (RoA) is projected to stay healthy at 3.1 per cent, according to Prabhudas Lilladher Capital.

 

Shriram Finance also ruled out applying for a banking licence. “Our constituency is the under-banked and unbanked. There is no point in becoming a bank and serving the unbanked,” said Umesh Revankar, executive chairman, Shriram Finance, adding that the NBFC structure allows deeper specialisation, better customer customisation and stronger asset-backed lending.