Mitsubishi UFJ Financial Group is evaluating how to lift its holding in Shriram Finance to a controlling level above 50%, according to people familiar with the thinking. The idea is at a preliminary stage and could shift, and there is no firm schedule for a deal. If MUFG ultimately proceeds, it would amount to the biggest overseas investment ever in India's financial industry.
MUFG bought about 20% of Shriram for $4.4 billion in April, securing two seats on the board. That transaction pegged Shriram's value at more than $20 billion. People with knowledge of the matter say MUFG may need to add over $10 billion to cross the majority threshold, which would take its total outlay beyond $14 billion. In December, when asked about upping its stake, a MUFG executive said the company could consider that over the longer term while noting no decision had been made at that time.
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Shriram's stock climbed 6% after the news, its biggest one-day rise in four months and better than the Sensex on the day. A successful bid would signal confidence in India's long-run growth even as foreign money has been flowing out of local equities and the rupee hovers near record lows. The effort also meshes with Japanese lenders pushing abroad as India gains importance for global capital, and it would probe how open regulators are to foreign control of major domestic financial firms. MUFG and Shriram spokespeople declined to comment.
Japan's banks have been building a footprint: Sumitomo Mitsui Financial Group now holds the largest stake in Yes Bank, while Mizuho Financial Group has a deal to take control of Avendus Capital, an Indian investment bank.
Shriram brings something hard for an overseas bank to replicate from scratch: lending relationships with customers big lenders often skip, such as truck owners and small businesses, plus reach into smaller cities and rural markets. If MUFG moves to control it, you're looking at a long-term bet on India's domestic demand story at a time when global investors have been skittish.
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