Shriram Finance Limited has achieved another significant milestone with CARE Ratings Limited assigning the coveted 'CARE AAA; Stable' rating to its Fixed Deposit Programme on December 30, 2025. This development follows the company's earlier credit rating upgrade to 'CARE AAA; Stable' from 'CARE AA+; Stable' for its debt instruments, marking continued recognition of the NBFC's strengthened financial profile post the landmark MUFG Bank partnership.

Latest Rating Assignment

CARE Ratings Limited has assigned the highest credit rating to Shriram Finance's Fixed Deposit Programme, as communicated through an official letter dated December 30, 2025. The company has informed both BSE Limited and National Stock Exchange of India Limited about this rating assignment under Regulation 30 of the SEBI Listing Regulations.

Previous Credit Rating Upgrades

The latest rating assignment builds upon Shriram Finance's recent credit rating enhancement across multiple debt instruments. CARE Ratings had previously upgraded the company's credit ratings after assessing improved financial profile, stronger liquidity position, and reduced leverage following the MUFG transaction.

Strategic Benefits of AAA Rating

The AAA credit rating for Fixed Deposits represents the highest credit rating category, indicating extremely strong capacity for timely payment of financial obligations. This enhancement provides several strategic advantages for Shriram Finance's deposit mobilization efforts.

MUFG Partnership Impact

The rating enhancements follow Japan's MUFG Bank's agreement to acquire a 20% stake in Shriram Finance for approximately ₹40,000.00 crores. This transaction significantly strengthened the company's capital position, with Tier-1 capital expected to rise to around 33% from 20%, while leverage is projected to reduce to nearly 3x.

Market Position and Outlook

As India's second-largest retail NBFC after Bajaj Finance, Shriram Finance operates across commercial vehicle financing, tractors, and passenger cars in both urban and rural markets. The company has received overwhelming positive analyst coverage, with 35 out of 38 analysts maintaining a 'buy' rating following the MUFG deal and credit rating upgrades.

The stronger credit profile positions Shriram Finance advantageously for accessing low-cost funding across various instruments, including fixed deposits, supporting its expansion strategy across lending segments and enhancing long-term growth prospects.

Shriram Finance management has outlined comprehensive growth strategies and financial projections following the landmark $4.40 billion investment from Japan's MUFG Bank, which will acquire a 20% stake in the non-banking financial company. The strategic partnership represents MUFG's largest investment commitment in India, surpassing their previous $1.70 billion investments in the country.

CARE Ratings Upgrades Debt to AAA Status

CARE Ratings has elevated the credit rating on Shriram Finance's non-convertible debentures and subordinate debt worth ₹2,500.00 crore to "CARE AAA; Stable" from the previous "CARE AA+; Stable" rating. The rating agency has simultaneously reaffirmed its top short-term rating of "CARE A1+" on the company's commercial paper programme aggregating ₹7,500.00 crore.

Management Outlines Aggressive Growth Targets

Executive Vice-Chairman Umesh Revankar announced plans to accelerate growth from the current 16-17% to 18-20% annually, leveraging the substantial capital infusion and improved borrowing costs. The company expects to benefit from India's robust GDP growth of over 8% in recent quarters and anticipates credit demand to grow at approximately 2.5 times the GDP rate.

Significant Financial Performance Improvements Expected

Management projects substantial improvements in key financial metrics over the next five years. The company expects its Return on Assets (ROA) to expand from the current 2.80% to 3.60%, while the cost of funds is anticipated to decline by nearly 100 basis points over the next 1.5 to 2 years.

Strategic Partnership Benefits and Operational Synergies

MUFG's investment brings significant operational advantages beyond capital infusion. The Japanese banking giant, with $2.80 trillion in assets and ranking as the world's 10th largest bank by asset size, will provide two board seats and potential support in funding, capital markets, and treasury solutions.

Product Strategy and Market Expansion

The company plans to maintain its conservative approach while selectively expanding into higher-ticket segments. Shriram Finance will focus on retaining existing customers who typically migrate to new vehicle financing as their businesses grow, with approximately 30% of customers moving out over time due to business expansion needs.

The management confirmed they will not venture into large-ticket SME lending or loan against property (LAP) products, maintaining their focus on business cash flow-based lending with adequate security. The vehicle financing segment, representing 70% of the loan book, will continue to receive the majority of growth capital deployment.

Regulatory Approvals and Timeline

The transaction awaits regulatory approvals from RBI and Competition Commission of India (CCI) following the Extraordinary General Meeting scheduled for January 14. Management expects the approval process to take two to three months, with completion targeted within the current financial year or by April at the latest.