MUFG Bank investment lifts Shriram Finance shares to a fresh record high; stock up 58% in 2025

Extending its gaining streak for the fourth straight session, shares of Shriram Finance Limited (SFL) rose nearly 3% to hit a new record high in opening trade on Monday as sentiment improved following the board’s approval of MUFG Bank’s ₹39,618 crore investment in the non-banking financial company (NBFC).

According to analysts, the capital infusion will provide a huge boost to SFL’s balance sheet, allowing the company to venture into new product and customer segments, accelerating its growth outlook.

After gaining 3.74% in the previous session, the Shriram Finance share price added 2.98% today to touch a new all-time high of ₹928.70 on the BSE, while its market capitalisation climbed to ₹1.73 lakh crore. The NBFC stock has nearly doubled from its 52-week low of ₹493.60 touched on January 20, 2025.

In the last one month, the stock has risen 11.5% amid reports of stake buying by the Japanese major Mitsubishi UFJ Financial Group (MUFG). The counter has delivered a solid return of 40% in the past six months, while it has rallied as much as 58% in calendar year 2025.

MUFG Bank to acquire 20% stake

The board of Shriram Finance on Friday, December 19, approved a ₹39,618 crore equity infusion by Japan’s MUFG Bank through the preferential allotment route. The investment has been made at ₹840.93 per share and translates into an ownership stake of around 20% for MUFG—almost on par with the current promoter group.

The proposed investment by MUFG Bank is subject to shareholders’ approval, regulatory clearances, and standard closing conditions.

According to Emkay Global, the sizeable capital infusion will provide a significant boost to SFL’s balance sheet. As of September 2025, the company’s net worth stood at ₹60,400 crore; post-infusion, its net worth and Tier I capital will move extremely close to that of Bajaj Finance and well above other non-PSU NBFC peers. The brokerage estimates SFL’s pro forma Tier I capital ratio for March 2026 to rise by about 14 percentage points to nearly 34%.

“The deal pushes up SFL’s Tier I capital adequacy by 14% (on a pro forma March 2026E basis), making a strong case for a rating upgrade, which is also supported by MUFG’s association and commitment,” the report noted.

“While RoE is likely to drop in the near term due to over-capitalisation, the multiple optionalities—including a reduction in the cost of borrowings, the ability to attract top-level talent, and a possible transition into a bank—catapult SFL into the next orbit of profitable growth over the medium to long term,” Emkay Global said.

According to the brokerage, the deal could materially alter SFL’s growth and profitability trajectory. Potential benefits include a rating upgrade driven by stronger capital adequacy and MUFG’s backing, which could help narrow SFL’s roughly 100-basis-point cost-of-funds gap with AAA-rated peers.

Motilal Oswal views this transaction as a strategically significant and value-accretive development for SFL. MUFG’s investment is expected to support the company’s next phase of growth by providing long-term capital to accelerate expansion across core segments, including CV and MSME lending, while strengthening balance-sheet resilience through enhanced creditworthiness and funding capacity, it said. Over time, this could culminate in a potential credit rating upgrade to AAA for SHFL, it added.

The brokerage expects the preferential issue to be infused in FY27, post receipt of all requisite approvals, and has accordingly revised its earnings estimates. It has increased its FY26/FY27 EPS estimates by 10%/17%, driven primarily by lower leverage and further supported by a modest uplift from improved AUM growth prospects.

Motilal Oswal expects SHFL to deliver a PAT CAGR of 25% over FY25–28E and an RoA/RoE of 3.8%/13.2% by FY27.

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