In a significant development, Shriram Finance has approved a preferential equity issuance of INR396.2b to MUFG Bank Ltd., a leading Japan-based financial institution, at an issue price of INR840.93 per share. This investment is expected to support the company's next phase of growth and strengthen its balance sheet resilience.
MUFG's investment will provide long-term capital to accelerate expansion across core segments, including CV and MSME lending. This could culminate in a potential credit rating upgrade to AAA for Shriram Finance over time.
Shriram Finance continues to deliver sector-leading performance, driven by broad-based loan growth, a diversified product mix, and disciplined risk management. The franchise has outperformed peers over the past 6-9 months, supported by sustained demand in the used-vehicle segment and resilience across its core customer base.
We expect Shriram Finance to deliver a PAT CAGR of ~25% over FY25-28E and an RoA/RoE of 3.8%/13.2% by FY27. This positive outlook has led to a reiteration of the BUY rating on the stock with a target price of INR1,100 based on 2x Mar'28E P/BV.
Key highlights of the investment include:
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple factors before making any investment decisions.
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