Shriram Finance Gets Rare Score In Major CARE Credit Rating Upgrade
A key driver behind the credit rating upgrade has been MUFG's massive Rs 40,000 crore investment into the company, with the Japan-based firm acquiring 20% stake in Shriram Finance.
In a major development for Shriram Finance Ltd., the non-banking financial company has received a credit rating upgrade by Care Ratings, marking its first such update since MUFG acquired a stake in the firm.
CARE Ratings has upgraded the credit rating of Shriram Finance to CARE AAA; Stable from CARE AA+; Stable. The rating agency also re-affirmed CARE A1+ for the Company’s Commercial Paper.
CARE Ratings has upgraded Shriram Finance’s credit rating for its Non-Convertible Debentures (NCDs) and subordinated Debt.
A key driver behind the credit rating upgrade has been MUFG's massive Rs 40,000 crore investment into the company, with the Japan-based firm acquiring 20% stake in Shriram Finance.
In addition, the NBFC has also shown improved financial profile, stronger liquidity position as well as reduced leverage.
The company has also registered consistent asset quality and robust risk management practices, in addition to sustained profitability and healthy growth in loan book.
Key Benefits Of AAA Rating
The rare AAA credit rating should go a long way in helping Shriram Finance lower borrowing cost, as it will be entitled to the highest credit rating in the system.
This will also lead to improved investor confidence, attracting more institutional investors while giving the NBFC better access to long-term funds at competitive rates.
This, in turn, would lead to strengthened balance sheet resilience, thus aiding sustainable growth.
In light of the CARE credit rating upgrade, shares of Shriram Finance have gained more than a percent, thus continuing the upward momentum the stock has seen over the past six months, during which the shares have gained as much as 36%.
Out of 38 analysts tracking the company, 35 maintain a 'buy' rating, three recommend a 'hold,' while no analyst has yet issued a sell call, according to Bloomberg data. The average 12-month consensus price target implies an upside of 1.8%.
