Shriram Finance Limited has received a fresh credit rating from CRISIL Ratings Limited for its fixed deposit programme. The rating agency assigned 'Crisil AA+/Watch Positive' rating to the company's ₹80,000 crore fixed deposit programme on January 14, 2026, as communicated to stock exchanges under Regulation 30 of SEBI Listing Regulations.

Strategic Investment Drives Rating Action

The rating assignment comes following Shriram Finance's significant corporate development announced on December 19, 2025. The company's Board of Directors approved definitive agreements with MUFG Bank Ltd for an investment of ₹39,618 crore ($4.40 billion) through preferential issue of equity shares.

MUFG Bank, Japan's premier bank with global operations across 50 countries, will gain special rights including board representation. The proposed transaction is expected to be consummated in 2026, subject to various regulatory and statutory clearances.

Comprehensive Rating Coverage

CRISIL's rating action extends beyond the fixed deposit programme, covering multiple debt instruments and facilities:

The rating agency has placed most long-term ratings on 'Rating Watch with Positive Implications' while reaffirming short-term ratings at 'Crisil A1+'.

Strong Market Position and Financial Metrics

Shriram Finance maintains its position as India's second-largest retail NBFC and third-largest non-bank financier. The company's diversified portfolio spans multiple segments:

The company's financial performance demonstrates robust fundamentals with assets under management of ₹2,81,309 crore as of September 30, 2025, compared to ₹2,63,190 crore as of March 31, 2025.

Capitalisation and Earnings Profile

Shriram Finance's capitalisation profile remains strong with healthy financial ratios:

The company reported net profit after tax of ₹4,474 crore during the first half of fiscal 2026, supported by stable credit costs of less than 2.00% and net interest margin of 8.80%.

Asset Quality Improvement

Shriram Finance has demonstrated consistent improvement in asset quality metrics. The Gross Stage 3 ratio remained stable at 4.60% as of September 30, 2025, compared to 5.50% as of March 31, 2024. The Net Stage 3 ratio improved to 2.50% from 2.70% during the same period.

Rating Outlook and Implications

CRISIL expects the MUFG Bank transaction to significantly benefit Shriram Finance's capitalisation profile, with networth expected to cross ₹1 lakh crore. The rating agency believes this will support the company's growth plans and improve its liability franchise through lower incremental borrowing costs. CRISIL indicated that upon resolution of the Rating Watch, the rating may change by up to one notch, suggesting potential for upgrade.

The $4.4 billion transaction between Shriram Finance and Japan's MUFG Bank has created a divide between rating agencies and proxy advisors, with the former providing upgrades while the latter raise governance concerns ahead of the January 14 shareholder vote.

Rating Agencies Provide Strong Support

Major credit rating agencies have responded positively to the deal announcement, viewing it as a significant boost to Shriram Finance's financial profile. The upgrades reflect confidence in the transaction's ability to strengthen the NBFC's market position.

Care Ratings became the first to upgrade the domestic lender, citing improved creditworthiness following the deal announcement. Icra emphasized that the transaction will significantly improve Shriram Finance's capitalization profile, providing a sizeable buffer for growth and managing asset quality volatility given the target borrower profile.

Moody's upgrade on January 9 highlighted that MUFG's proposed investment will provide a stronger capital base, access to global expertise and funding channels, and improve funding diversity and risk management practices over time. The agency noted that the positive outlook reflects expectations of strengthened business and financial profiles supported by a strong strategic shareholder and significant capital increase.

Brokerage Firms Echo Optimism

Brokerage firms have issued bullish calls on Shriram's stock since the deal announcement. Key recommendations include:

• Jefferies: Increased target price by 8.00%
• Nomura: Hiked target price by 5.00%
• CLSA: Maintained 'outperform' rating with ₹1,030.00 target price

Proxy Advisors Raise Governance Concerns

Despite positive market reception, two prominent proxy advisors have flagged concerns about three key resolutions requiring shareholder approval:

Stakeholders Empowerment Services (SES) has opposed all three proposals, while Institutional Investor Advisory Services (IiAS) has opposed only the third resolution. InGovern Research Services has supported all resolutions.

SES Arguments on Control Transfer

SES contends that MUFG is seeking de-facto control of Shriram Finance, which should trigger a mandatory open offer under Indian takeover regulations. The proxy advisor argues that despite falling below the 25.00% threshold mandated by India's takeover regulation, the arrangement bypasses the spirit of the law by placing MUFG in the "driving seat jointly with the promoter."

The firm invokes the "commercial reality" doctrine, suggesting that governance rights are structured to replicate control while avoiding open-offer obligations. SES argues that MUFG is acquiring influence through board seats and additional rights that exceed those of original promoters.

Shriram Finance has rejected these claims, maintaining that no control, legal or practical, has shifted. The company argues that rights granted, including two board nominations and secondment rights for key appointments, are "protective and reactive" rather than "proactive," intended solely to preserve MUFG's proportionate holding without preferential voting or economic advantages.

Non-Compete Payment Controversy

Both SES and IiAS have flagged the $200.00 million non-compete payment to the Shriram Ownership Trust as a significant governance concern. The payment is intended to bar promoters from launching a rival lending entity, but advisors question its necessity and transparency.

Key concerns include:

• Lack of clarity on ultimate beneficiaries and allocation mechanisms
• Questionable need for non-compete premium when promoters aren't exiting
• Information asymmetry between insiders and public shareholders
• Concentration of financial windfall in specific trust rather than broader deal terms

IiAS argues that as long as promoters remain at the helm and retain significant stakes, their interests should already align with the firm's success. The advisor questions why protection is required when competing against their own company would harm promoters' economic interests given their comparable shareholding with MUFG.

Market Perspective on Shareholder Decision

Equity strategist Kranthi Bathini from WealthMills Securities suggests that governance issues are often based on individual advisory perspectives and can typically be resolved. He emphasizes that shareholders with long-term perspectives should recognize Shriram Finance as a legacy business with strong fundamentals, noting that MUFG's investment will provide increased visibility and stronger outlook, ultimately benefiting minority shareholders.

The extraordinary general meeting for shareholder approval is scheduled for January 14, with e-voting having commenced on January 11.