Shriram Finance shares reached a historic milestone on the first day of 2026, crossing the ₹1,000 mark for the first time and hitting a record high of ₹1,009. The stock gained 1.30% during the session, extending its winning streak to three consecutive sessions with a cumulative rise of nearly 6% over this period. The remarkable performance in 2025 saw the stock surge 72%, making it one of the standout performers in the financial sector.

MUFG Investment Drives Market Confidence

The primary catalyst behind Shriram Finance's exceptional performance has been Japan-based MUFG's agreement to acquire a 20% stake in the company for $4.4 billion. This transaction represents MUFG's largest investment in India, significantly surpassing its previous cumulative investments of $1.7 billion in the country. The deal marks a major vote of confidence from one of Japan's leading financial institutions in India's lending sector.

Analyst Upgrades and Price Targets

Leading brokerages have responded positively to the MUFG transaction, raising their target prices and maintaining bullish ratings on Shriram Finance. Nomura has increased its target price to ₹1,140, implying an upside of 14.40% from current levels. The brokerage highlighted that while MUFG Bank will be classified as a public shareholder, it will have the right to nominate up to two non-independent directors on the board. Nomura views the presence of a leading Japanese bank as value-additive across multiple aspects of Shriram Finance's operations and business model.

Citi has maintained its Buy rating while raising the target price to ₹1,100 from ₹870, backed by earnings upgrades of over 10%. The brokerage considers the MUFG transaction as a strong endorsement of Indian lenders by a global foreign bank, significantly strengthening Shriram's balance sheet.

Financial Impact and Balance Sheet Strengthening

The MUFG investment is expected to substantially improve Shriram Finance's financial metrics and capital position. Post the deal, Tier 1 capital is projected to rise sharply to around 33% from 20%, while leverage is expected to reduce to nearly 3x. Citi estimates over 30% accretion to book value, which enhances long-term growth capital and improves earnings visibility. The stronger capital position could facilitate a potential credit rating upgrade and provide better access to low-cost global funding over time.

PL Capital has reiterated its Buy call and raised its target price to ₹1,060 per share, emphasizing that the transaction would significantly strengthen the company's capital base and improve balance sheet resilience, providing long-term growth capital to support expansion across lending segments.

Credit Rating Upgrade

Earlier this week, CARE Ratings upgraded the credit rating on Shriram Finance's non-convertible debentures and subordinate debt aggregating ₹2,500 crore to "CARE AAA; Stable" from "CARE AA+; Stable." The upgrade reflects recent developments, including the company's operational and financial performance in FY25 and the first half of FY26. The rating agency has also reaffirmed the highest short-term rating of "CARE A1+" on the company's commercial paper programme amounting to ₹7,500 crore.

Shriram Finance Limited has received a significant penalty order from tax authorities related to GST violations dating back to FY 2018-19. The company disclosed this development through a regulatory filing under SEBI's listing regulations on December 31, 2025.

Penalty Details and Authority

The Commercial Tax Officer, Chennai South, Tamil Nadu issued the penalty order dated December 30, 2025, imposing a penalty of ₹13,03,53,551.00 for FY 2018-19. The penalty has been levied under Section 74 of the Central Goods and Service Tax Act, 2017, read with the Tamil Nadu Goods and Service Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017.

Nature of Violations

The penalty order addresses multiple GST-related violations that occurred during FY 2018-19. These violations pertain to the erstwhile Shriram City Union Finance Limited, which was amalgamated with Shriram Finance Limited effective April 1, 2022.

The specific violations identified include:

• Disallowance of input tax credit taken on payment of Reverse Charge Mechanism (RCM)
• Excess input tax credit claimed in GSTR-3B returns
• Issues related to credit notes issued
• GST implications on leasehold improvements

Total Financial Impact

The complete financial demand from the tax authorities extends beyond just the penalty amount. The total demand structure includes multiple components that significantly increase the overall liability.

Company's Response and Impact Assessment

Shriram Finance has indicated that there is no material impact on the company's financial, operational, or other activities from this penalty order. However, given the quantum of the amount involved, the company is exercising commercial prudence in its response approach.

The company is awaiting an opinion from its tax consultant regarding the Tamil Nadu state demand order reference number ZD331225453972B dated December 30, 2025. This suggests that the company may be considering legal or procedural options to address the penalty order.

Regulatory Compliance and Disclosure

The disclosure was made pursuant to Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015. The company received the order on December 30, 2025, and the copy was forwarded to the concerned officer on December 31, 2025, prompting the immediate regulatory disclosure.

This development highlights the ongoing scrutiny of GST compliance by tax authorities and the potential financial implications for companies, even for violations dating back several years. The case also demonstrates how corporate restructuring activities, such as amalgamations, can bring forward historical tax liabilities to the surviving entity.