Mumbai, Dec 19 Japan’s banking major Mitsubishi UFJ Financial Group on Friday announced that it has acquired a 20 per cent stake in Shriram Finance through a preferential allotment of shares in a deal valued at $4.4 billion, or about Rs 39,600 crore.
The transaction is set to become the largest foreign direct investment ever in India’s financial services sector.
Under the deal, MUFG will have the right to appoint two nominee directors to the board of Shriram Finance.
The investment highlights growing global confidence in India’s lending and financial ecosystem.
At nearly Rs 39,618 crore, the Shriram Finance transaction is the biggest investment in India’s financial sector so far.
“The Board has approved raising of funds of Rs 3,96,17,98,28,781.15 from MUFG Bank Limited, a company incorporated under the laws of Japan, by way of issuance of 47,11,21,055 fully paid-up equity shares of face value Rs 2 each of the Company at a price of Rs 840.93 per subscription share, through preferential issue on a private placement basis,” Shriram Finance said in its filing.
It surpasses earlier major deals such as Emirates NBD’s investment in RBL Bank, Sumitomo Mitsui Banking Corporation’s stake purchase in Yes Bank, International Holding Company’s investment in Sammaan Capital, and the capital infusion by Warburg Pincus and ADIA into IDFC First Bank.
The company added that the fresh capital will support long-term growth and business expansion across its lending segments.
The transaction involves a primary issuance of equity shares and is subject to shareholder approval, regulatory clearances and other standard closing conditions.
The lender currently has assets under management of over Rs 2.81 trillion and operates through a nationwide network of 3,225 branches across India.
“The Floor Price of the equity shares determined in accordance with Chapter V of SEBI ICDR Regulations is Rs 840.93 per Subscription Share,” it added.
Following the announcement, shares of Shriram Finance rose 4.15 per cent to Rs 905.5 on Friday at around 2:24 pm.
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