Analysts believe Shriram Finance could enter a phase of faster, more competitive growth following MUFG Bank’s Rs 39,618 crore equity infusion, with some brokerages now flagging the possibility of the NBFC growing at rates comparable to larger peers such as Bajaj Finance and Cholamandalam Investment & Finance. Brokerages have given ‘BUY’ rating to the company and have raised the target price now in the range of Rs 1,050- Rs 1,225.
Financial structure
The Shriram Finance board approved the preferential allotment on Friday at Rs 840.93 per share, translating into nearly 20% ownership for MUFG—close to the current promoter group’s stake. While MUFG will be classified as a public shareholder with the right to nominate two board members, analysts increasingly view the transaction as a strategic investment with long-term intent.
“We see this as a strategic investment by MUFG, with long-term plans that could include increasing its shareholding and eventually becoming the promoter,” Emkay Global said, highlighting the scale of the capital infusion and its implications for balance-sheet strength.
Rise in Shriram Finance’s net worth
Post infusion, Shriram Finance’s net worth is expected to rise sharply from about Rs 60,404 crore as of September, taking its Tier I capital close to Bajaj Finance’s levels and well above most non-PSU-NBFC peers. Emkay estimates the Tier I ratio will rise by about 14 percentage points to nearly 34% by March.
Nomura said the strengthened capital base could materially alter Shriram Finance’s growth trajectory. While the company’s three-year AUM CAGR of about 18% trails Bajaj Finance and Cholamandalam, which have grown at 28–31%, Nomura believes the gap could narrow. “With the large capital infusion and diversification plan, we foresee a big upswing in SHFL’s growth outlook,” it said, adding that assets under management growth could rise to around 20% over the medium term.
Brokerages also see funding benefits as a key catalyst. Shriram Finance currently borrows at a roughly 100 basis point premium to AAA-rated peers. “Improved leverage driven by equity infusion and strong foreign parentage could fast-track the credit rating upgrade,” ICICI Securities said. Motilal Oswal described MUFG’s entry as a “strategic inflection point”, citing lower cost of funds, stronger balance-sheet credibility and improved ability to compete in new commercial vehicle and other lower-yield segments.
Nomura said it has lifted its FY28 AUM growth assumption to 20% from 17% earlier and trimmed cost of funds by 24 basis points, resulting in a 22% increase in profit estimates. It reiterated a Buy rating on Shriram Finance and raised its target price to Rs 1,140, implying a one-year forward price-to-book of about 2.1x post dilution.
While return on equity may remain subdued in the near term due to the size of the equity infusion, analysts broadly agree the MUFG transaction marks a structural upgrade in Shriram Finance’s growth potential, funding profile and long-term valuation.