Proxy advisory firms Institutional Shareholder Services (ISS) and InGovern have recommended shareholders to vote in favour of Shriram Finance’s proposed strategic investment by Japan’s MUFG Bank.
ISS said the preferential allotment would lead to dilution of over 20% for existing shareholders, which it described as “generally deemed high”. However, it backed the proposal, citing the benefits of a long-term strategic partnership with a global banking major, improved access to funding markets and a potential reduction in borrowing costs over time. The proxy firm also noted that the issue price has been set in line with regulatory requirements and prevailing market prices.
Assessing the Dilution: Why Advisors Prioritize Strategic Value
InGovern, in a separate report, also supported all resolutions related to the transaction, including the grant of special rights to MUFG and the one-time non-compete payment to Shriram Ownership Trust. The advisory firm said the deal would strengthen Shriram Finance’s capital base, support compliance with enhanced capital requirements and improve governance standards, while maintaining promoter control.
Governance and Non-Compete: Protecting the “Shriram” Brand
MUFG is set to acquire a 20% stake in Shriram Finance through a preferential issue, subject to regulatory approvals. The proposals will be put to vote at the company’s extraordinary general meeting on January 14.