INDIA’S LENDING and financial services space was riding high in 2025. Yet, perhaps the best was kept for the last. On December 19, Japan-based Mitsubishi UFJ Financial Group’s MUFG Bank announced a fund infusion worth ₹39,618 crore in Shriram Finance, India’s second-largest retail-focussed NBFC. In a banner year marked by a series of marquee transactions in India’s financial sector, MUFG’s capital infusion emerged as the largest finance sector deal of 2025 and the largest FDI ever in an Indian financial services company.

According to the deal, the Japanese banking giant will acquire a 20% stake — at par with the promoter group’s 20.3% post-transaction holding — and the right to appoint two nominee directors to Shriram Finance’s board. More importantly, it marks a decisive shift — from selective capital infusions to a full-fledged race for ownership in India’s finance sector. 2025 saw similar deals, proving that foreign investors were seeking scale, influence, and long-term participation in India’s fast-expanding ecosystem. The U.A.E.-based Emirates NBD’s investing ₹26,853 crore in RBL Bank, Japan’s SMBC emerging as the single largest shareholder in Yes Bank, Abu Dhabi–based International Holding Company buying 43.5% stake in Sammaan Capital, and Warburg Pincus and ADIA infusing ₹7,325 crore into IDFC First Bank were a testimony to the sector’s robust fundamentals and long-term growth potential.

Bullish reassessment

Brokerages term the MUFG deal a “transformational” milestone. Analysts believe it will strengthen Shriram Finance’s balance sheet, enhance credit profile, and provide ample growth capital to spur expansion across consumer vehicle, MSME, and retail lending.

The sheer investment size materially alters Shriram Finance’s financial profile, notes Emkay Global. It estimates the net worth could rise from September’s ₹60,400 crore to about ₹1.04 lakh crore by March 2026, pushing the pro forma Tier I capital ratio up by nearly 14 percentage points to around 34%. Axis Capital expects the deal to improve Shriram Finance’s funding capacity, lower the cost of funds, and support stronger AUM growth, while also opening access to MUFG’s global network.

Motilal Oswal and ICICI Securities project potential margin expansion, improved profitability metrics, and faster growth aided by lower borrowing costs. Both brokerages reiterate their ‘buy’ ratings, citing improved earnings visibility and balance-sheet resilience after the investment.

Banking licence likely?

Following the deal, speculation is rife on Shriram Finance’s eventual transition into a bank. While it clarified that it has no immediate plans to pursue a banking licence, the NBFC hasn’t ruled out the long-term possibility. Parag Sharma, MD and CEO, says the company saw strong growth opportunities within its existing NBFC model and looked to stay focussed on its core asset classes for now. “The scope and demand are huge. We will continue to focus on what we do best and grow as much as possible,” he tells Fortune India. Executive vice chairman Umesh Revankar seconds, saying becoming a bank was not on the immediate agenda. “We prefer to remain where we are. India is growing very fast, and that gives us a large opportunity in retail lending,” he says.

D-Street’s blessings

Amid reports of the deal, Shriram Finance’s shares rallied 15.8% over a month until December 23, sharply outperforming the broader market. In comparison, the BSE Sensex gained just 0.4%, while the BSE Finance index rose a 0.5% during the same period.

After the deal announcement, the NBFC heavyweight surged more than 10% in three trading sessions, hitting a fresh all-time high of ₹956.70 on December 23. Its m-cap climbed to about ₹1.79 lakh crore. The stock has nearly doubled from its 52-week low of ₹493.60 hit on January 20, 2025, underscoring strong investor confidence and growth outlook.

In Q3FY26, Shriram Finance posted an 11.6% YoY rise in consolidated net profit to ₹2,315 crore. Net interest income grew 10% to ₹6,026 crore, while pre-provision operating profit came in at ₹4,446 crore. Net interest margins remained healthy and stable at 8.19%.