Shriram Finance Share Price Rallies As MUFG Looks To Acquire 20% Stake In Co

Shares of Shriram Finance Ltd. rallied in trade on Friday after Japanese Mitsubishi UFJ Financial Group (MUFG) indicated being in talks to invest nearly Rs 40,000 crore or $4.5 billion for a 20% stake. Shriram Finance's stock price fell from trading in the red to nearly 4% higher.

The deal marks the largest strategic investment by a foreign lender in India's non-banking financial company (NBFC) sector. According to the deals of the transaction, Japan's MUFG will acquire 47.1 crore shares at a floor price of Rs 840.93 per share.

"The Board of Directors of Shriram Finance Ltd (SFL) at their meeting held today approved entering into definitive agreements with MUFG Bank Ltd. (MUFG Bank) for an investment of Rs 39,618 crore (~$4.4 billion ) in SFL through a preferential issuance of equity shares. This investment will result in MUFG Bank acquiring a 20.0 % stake on a fully diluted basis," said the NBFC in a regulatory filing to the stock exchanges on Friday, Dec. 19.

MUFG will pay a one-time, non-recurring, non-compete and non-solicit fee of $200 million to Shriram Ownership Trust. MUFG also will have the right to appoint two nominee directors on the board of Shriram Finance.

The scrip rose as much as 3.74% to Rs 901.95 apiece. It pared gains to trade 3.38% higher at Rs 898.80 apiece, as of 12:57 p.m. This compares to a 0.53% advance in the NSE Nifty 50 Index.