Shriram Finance shares in focus as CARE upgrades credit rating to AAA following MUFG deal

CARE Ratings has upgraded the credit rating on Shriram Finance’s non-convertible debentures and subordinate debt aggregating Rs 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 Rs 7,500 crore.

The upgrade follows Japan’s MUFG agreeing to acquire a 20% stake in Shriram Finance for $4.4 billion, marking the Japanese bank’s largest-ever investment in India and surpassing its earlier cumulative investments of $1.7 billion.

For investors, the size, structure and timing of the transaction are being viewed as a strong endorsement of Shriram Finance’s fundamentals and long-term growth prospects. The company termed the deal a landmark development, noting that it reinforces its position as India’s second-largest retail NBFC and strengthens confidence in the country’s lending ecosystem.

Following the MUFC deal, international brokerage Nomura has raised its target price on the stock to Rs 1,140, implying an upside of 15% from current levels. While MUFG Bank will be classified as a public shareholder, Nomura highlighted that it will have the right to nominate up to two non-independent directors on the board. In the brokerage’s view, the presence of a leading Japanese bank could add value across multiple aspects of Shriram Finance’s operations and business model, making the development a clear positive.

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Citi has maintained its Buy rating on Shriram Finance while raising the target price to Rs 1,100 from Rs 870, backed by earnings upgrades of over 10%. The brokerage views the MUFG transaction as a strong endorsement of Indian lenders by a global foreign bank, significantly strengthening Shriram’s balance sheet. Post the deal, Tier-1 capital is expected to rise sharply to around 33% from 20%, with leverage reducing to nearly 3x. Citi estimates over 30% accretion to book value, which not only enhances long-term growth capital but also improves earnings visibility. The stronger capital position could pave the way for a potential credit rating upgrade and better access to low-cost global funding over time.

PL Capital reiterated its Buy call on Shriram Finance and raised its target price to Rs 1,060 per share. The brokerage said 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.Shriram Finance shares have risen an impressive 63% since the beginning of the year.

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