Shriram Finance Targets 20% AUM Growth After MUFG’s $4.4 Bn Investment

Shriram Finance is expected to grow its assets under management (AUM) by around 18-20% year-on-year after the $4.4 billion capital infusion by Japan’s Mitsubishi UFJ Financial Group (MUFG), according to MD and CEO Parag Sharma. The investment, announced in December last year, was finalised in April 2026 after receiving the necessary regulatory approvals.

Under the transaction, MUFG acquired a 20% stake in the retail-focused non-banking financial company (NBFC), becoming a minority shareholder.

Sharma says the deal solves the issue of capital constraints that had always existed for the NBFC.

“Because (our) promoters were never deep-pocketed. We were always looking for new partners to come in. So that worry has completely been erased now. We don’t have to worry about the need to raise capital or constrain our growth,” Shriram Finance CEO told Outlook Business.

The capital infusion also helps the NBFC, currently with ₹3,138 billion in AUM, seek higher growth from each of its verticals.

“There are sufficient opportunities in the businesses we are in... be it commercial vehicles, passenger vehicles, construction equipment, farm equipment, MSME lending, two-wheeler lending. Opportunities are there across all those verticals,” said Sharma.

“Because of higher capital adequacy now, it’s something we can easily hop upon. We were initially guiding the market that we can grow (in AUM terms) easily at around 12-15%... Because capital constraints are not there, we are now guiding that we will be at around 18-20% growth, in spite of a much larger weight and total AUM being over ₹3,10,000 crore now,” he further added.

This guidance also factors in annual GDP growth of 6-7% and slightly higher inflation.

How MUFG Helps Shriram

MUFG had been an offshore lender to Shriram even before its massive capital infusion. But with the partnership, Sharma says its offshore fundraising will improve.

“The benefits that we are seeing from MUFG are that they have been lending to us and also helping us raise funds offshore. They have a large investment in Morgan Stanley. We have close to 20% of our borrowing which is offshore, the ECB loan or bond. That really is now being helped by MUFG as a partner,” the NBFC CEO said.

The company’s net worth crossed ₹1 lakh crore after the transaction, up from ₹62,093 crore, according to Crisil Ratings. This is expected to support the company’s growth plans over the medium term.

According to a report by the ratings agency in April, the association with MUFG Bank is expected to benefit Shriram Finance’s liability franchise through access to funds at a lower cost and further diversification of its domestic debt capital market investor base. The agency noted that the cost of borrowing has already seen some reduction over the past few months following the announcement of the transaction with MUFG Bank.

When asked if the NBFC, with better capital adequacy, plans to apply for a banking licence, Shriram Finance CEO Parag Sharma said MUFG is quite clear that the entity should continue to remain retail-focused and grow as long as opportunities exist, with no need to convert into a bank.

“The retail focus is best served as an NBFC. We don’t have any aspirations to do wholesale or large-ticket lending, which banks will have to do," he added. Shriram Finance also believes remaining a non-banking financial company (NBFC) is more efficient than becoming a bank. Converting to a bank would require it to comply with Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) rules, meaning it would have to keep a significant portion of its funds in low-risk reserves instead of lending them to customers. This could reduce the funds available for growth and increase the cost of running the business.

"Now that we have MUFG with us, it is their call. They can decide whether they want the entity to be merged with the bank or whether a standalone NBFC serves the cause much better,” Sharma added.

MUFG has also invested heavily in technology companies in Asia, which is expected to help Shriram improve efficiency in its operations.

“They have large investments in Ireland, Malaysia, Indonesia and Vietnam, and also some of the fintech companies in India. That will definitely help us to have faster operations, smoother operations when it comes to adopting technology for retail lending,” Sharma further said.

Opportunities in MSME & Gold Lending

The Chennai-headquartered non-banking lender’s portfolio is dominated by vehicle finance, especially commercial vehicles, which make up 47% of its overall AUM mix. Sharma said this mix is expected to remain largely the same going forward, although the company is seeing good opportunities in MSME and gold-backed lending.

“We are looking at good opportunities in MSME. There also, what we are seeing is more or less people shifting from unorganised to organised. It is more of friends and families lending to a small shop owner or a small industry. Now, it is becoming more professional because of GST and all. There, because of our reach, maybe we can increase that portfolio slightly more. Gold is a very safe asset, nothing to think about, no-brainer. You take an asset which is in custody, the prices have been more or less stable or going up. In three or four months, nothing goes wrong there,” he said.

In the first quarter of FY27, Shriram Finance saw its gold loan disbursements rise 57% year-on-year, the highest among all its business segments.

“Gold is a proximity business. It is a walk-in customer. You enable and create the infrastructure at all the branches, and customers automatically walk in. The basic business of Shriram is lending for commercial assets, and the need for commercial assets is very limited in residential areas. It is more prominent in two-wheelers to a certain extent, and personal loans to a certain extent,” Sharma explained.

He added that the company is now considering standalone gold financing branches. These would be smaller branches, “almost a kiosk branch”, of around 150 square feet.

The focus for the NBFC now is on creating the infrastructure across its branches, which has helped increase its gold lending portfolio, aided by the rising price of the precious metal.