More often than not, the Shriram group was identified with its founder, R Thyagarajan (RT, as he is popularly known to many). Even today, RT commands enormous respect within and outside the group. Nevertheless, the Shriram group with its presence across a wide array of financial services activities today has embarked on a new course. The focus is clearly on securing a dominant space in the new normal financial services field, which has intensively integrated technology, like never before in the past.
On New Year eve, the Shriram group has stunned the corporate world with the biggest ever deal perhaps in the recent history of Indian financial services. The board of Shriram Finance Ltd. took everybody by surprise when it recently announced its decision to enter a definitive agreement with MUFG Bank of Japan. More than the alliance with the Japanese Bank, what took the corporate world by surprise was the deal size. It has proposed to let MUFG Bank pick up nearly 20 per cent stake in Shriram Finance for a whopping USD 4.4 billion (around Rs 39,618 crore)! Since the stake buy is sought to be allowed through the allotment of preferential shares, it is seen more as growth capital for Shriram Finance.
This landmark transaction indeed solidifies the status of Shriram Finance as the country’s second-largest retail non-banking financial company (NBFC) in terms of assets under management. It also represents a significant milestone for the Indian financial services industry on account of being the largest FDI (foreign direct investment) in a financial services company in India.
In a way, the investment is also viewed as a kind of vote of trust for the Indian financial services sector. The fund infusion is expected to significantly beef up the capital adequacy of the company, strengthen its balance sheet and provide long-term growth capital. “This collaboration is further expected to unlock synergies in technology, innovation and customer engagement, driving sustainable growth. It will improve access to low-cost liabilities and potentially strengthen the company’s credit ratings while aligning governance and operational practices with global best standards,” the company said.
In fact, MUFG Bank’s parent entity, Mitsubishi UFJ Financial Group (MUFG), has been in India for over 100 years now, contributing USD 1.7 billion in investments and creating jobs for approximately 5000 people. Umesh Revankar, Executive Vice-Chairman, Shriram Finance Limited said, “This transaction marks a defining moment in our growth journey. MUFG is one of the largest financial institutions, with an extensive international network and strong values rooted in substantial growth and financial inclusion.” The Shriram group appears to have moved into a fast-lane. Coming events cast their shadows before them, it is said. Is the brand Shriram set for a new brand image?
