Shriram Finance has entered into a strategic partnership with Japan-based MUFG Bank, with the latter investing approximately $4.4 billion for a 20% stake in the company. This significant investment is expected to strengthen Shriram Finance's growth journey, which has already shown promising signs after its merger with SCUF in 2022.
Partnership Details
As part of the deal, MUFG Bank will have the right to appoint two nominee directors on Shriram Finance's Board, enhancing the company's governance. The partnership will also lead to a fully diluted basis, with MUFG Bank and the existing promoter group owning approximately 20% each of the company.
Impact on Growth and Valuation
The increased capital base is expected to accelerate Shriram Finance's growth, with its AUM growth already showing an upward trend. The company's AUM growth has accelerated to over 15% year-over-year by September 2025, compared to a more modest growth rate in previous years. This growth is expected to continue, driven by the enhanced capital base and improved governance.
- Estimated revised book value per share (BVPS) at INR 490, up from INR 393 earlier
- Earnings upgrade of 25% for FY27E
- Revised target price of INR 1,225, valuing the company at 2.5x FY27E BVPS
Investment Implications
The partnership with MUFG Bank and the resulting growth acceleration make Shriram Finance an attractive investment opportunity. With a revised target price of INR 1,225, investors may want to consider adding this stock to their portfolio.
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider your individual financial goals and risk tolerance before making any investment decisions.