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Shriram Finance Limited (SFL) announced a strategic partnership with MUFG, a global banking leader, involving a 20% stake infusion for approximately $4.4 billion (₹36,500 crore). This capital infusion is expected to fuel SFL's growth strategy, aiming to increase its growth rate from the current 16%-17% to 18%-20% over the next few years. The company anticipates a reduction in borrowing costs by approximately 100 basis points over two years, leading to an expansion in ROA from 2.8% to 3.6% within five years. The gearing is expected to decrease from 4.3 to 2.6 post-infusion.

MUFG's expertise in digital platforms and experience in Asian markets is expected to provide significant advantages. SFL plans to leverage this partnership to enhance its digital capabilities and potentially explore synergies. The company will focus on strengthening its presence in rural and semi-urban markets, particularly in the North, Central, and East regions of India, while maintaining its core business of vehicle and SME financing.

The deal has received approval from both the MUFG and SFL boards, and an EGM notice has been issued for shareholder approval. The transaction is expected to be completed within two to three months, subject to regulatory approvals from RBI and CCI. SFL also anticipates a potential rating upgrade to AAA, further strengthening its financial standing. The company plans to deploy the capital by focusing on its existing customer base and upgrading to newer vehicle segments and larger ticket sizes within its core lending areas, rather than venturing into unrelated businesses or large-ticket LAP.