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 shares are set to be in focus following a significant credit rating upgrade from CARE Ratings, which comes on the heels of the company's landmark deal with Japan's MUFG Bank. The upgrade represents the first rating enhancement since the announcement of MUFG's substantial investment in the non-banking financial company.

CARE Upgrades Debt Rating to AAA

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.

The upgrade factors in recent operational and financial performance developments during the current fiscal year and the first half of the next financial year.

Significant Cost of Funds Reduction Expected

Management has indicated that the rating upgrade will meaningfully lower the company's cost of funds. Shriram Finance expects its cost of funds to decline by nearly 100 basis points over the next 1.5 to 2 years, representing a substantial improvement from the current calculated cost of funds standing at 8.70%.

MUFG's Landmark $4.4 Billion Investment

Japan's MUFG will acquire a 20% stake in Shriram Finance for $4.40 billion, marking MUFG's biggest commitment in India and surpassing its previous investments of $1.70 billion. The deal represents one of the most substantial foreign direct investments in the NBFC sector.

Masashige Nakazono, executive officer at MUFG Bank and head of the global commercial banking planning division, has indicated potential for further expansion, stating that there's a possibility of pushing their stake above 50% at an appropriate time, as regulations permit such acquisitions.

Sector Recovery Implications

The rating upgrade and international investment signal renewed confidence in the NBFC sector, which experienced significant challenges in 2018. The combination of improved credit ratings and substantial foreign investment demonstrates the sector's recovery trajectory and enhanced regulatory compliance.

The transaction validates the progress made by well-managed NBFCs in addressing previous concerns and establishing robust business practices, potentially indicating broader sector revival opportunities for investors seeking exposure to the recovering financial services space.