Shriram Finance Ratings Upgraded by CRISIL, Moody's Post MUFG Deal

A Wave of Upgrades Following Strategic Investment

Shriram Finance Limited has received a series of significant credit rating upgrades and positive outlook revisions from major rating agencies, including CRISIL, Moody's, and CARE. These actions follow the announcement of a landmark ₹39,618 crore ($1.40 billion) strategic investment by Japan's MUFG Bank for a 20% equity stake. The consensus among rating agencies points to a transformative impact on Shriram Finance's capital base, funding profile, and overall financial strength.

The Catalyst: MUFG Bank's Landmark Deal

The primary driver for the positive rating actions is the definitive agreement announced on December 19, 2025. MUFG Bank's plan to acquire a 20% stake through a preferential issue of equity shares represents one of the largest foreign direct investments in India's financial services sector. This transaction, expected to close in 2026 subject to regulatory approvals, is viewed as a major credit positive that will fundamentally bolster Shriram Finance's balance sheet and provide access to global expertise.

CRISIL Assigns 'AA+/Watch Positive'

On January 14, 2026, CRISIL Ratings assigned its 'Crisil AA+/Watch Positive' rating to Shriram Finance's substantial ₹80,000 crore fixed deposit programme. The agency also placed the company's other long-term bank facilities and debt instruments, including non-convertible debentures and subordinated debt, on 'Rating Watch with Positive Implications'. The short-term rating for its commercial paper was reaffirmed at 'Crisil A1+'. CRISIL noted that the MUFG investment is expected to push the company's net worth beyond ₹1 lakh crore, significantly strengthening its capitalisation and lowering incremental borrowing costs.

Moody's Revises Outlook to Positive

Aligning with the positive sentiment, Moody's Ratings affirmed Shriram Finance's Ba1 long-term corporate family rating but revised its outlook to 'positive' from 'stable'. Moody's stated that the outlook revision reflects the expectation that the company's business and financial profile will strengthen considerably. The agency highlighted that the capital infusion would materially improve capitalisation, gradually enhance profitability through lower funding costs, and improve access to both onshore and offshore funding channels.

CARE Ratings Delivers Top-Tier 'AAA' Upgrade

In a significant move, CARE Ratings Limited upgraded Shriram Finance's long-term instruments, including Non-Convertible Debentures and Subordinated Debt, to 'CARE AAA; Stable' from 'CARE AA+; Stable'. This upgrade to the highest possible rating category indicates an extremely strong capacity for timely payment of financial obligations. The stable outlook suggests that the rating is likely to remain unchanged in the medium term, reflecting CARE's confidence in the company's enhanced credit profile following its strong performance in FY25 and H1FY26.

Projected Financial Transformation

The capital infusion from MUFG is set to dramatically alter Shriram Finance's key financial metrics, providing a robust foundation for future growth and resilience against economic shocks. The projected improvements are substantial, positioning the company among the most highly capitalised NBFCs in India.

*Tangible Common Equity to Tangible Managed Assets

Impact on Funding and Profitability

A direct and significant benefit of the strengthened balance sheet and top-tier credit ratings is the anticipated reduction in the cost of funds. Management and analysts expect borrowing costs to decline by 50 to 100 basis points over the next 18 to 24 months. This reduction will directly improve Net Interest Margins (NIM) and overall profitability, enhancing the company's competitive edge in its core financing segments.

Strong Market Position and Asset Quality

These rating actions are built upon Shriram Finance's already solid market standing. As of September 30, 2025, the company was India's second-largest retail NBFC with Assets Under Management (AUM) of ₹2,81,309 crore. Its portfolio is well-diversified across commercial vehicles, passenger vehicles, and MSME financing. The company has also shown consistent improvement in its asset quality, with the Gross Stage 3 ratio stable at 4.60% as of September 2025, down from 5.50% in March 2024.

Investor Confidence and Market Reaction

The market has responded positively to these developments. Shriram Finance's stock price reached a new 52-week high following the announcements. Brokerage firms have also expressed increased optimism, with analysts raising their target prices, citing the fortified balance sheet, improved earnings visibility, and the strategic benefits of the partnership with MUFG.

A New Chapter for Shriram Finance

The strategic partnership with MUFG marks a pivotal moment for Shriram Finance. The wave of credit rating upgrades validates the company's robust business model and provides it with a significantly stronger financial footing. With a clear strategy, a fortified balance sheet, and access to lower-cost funding, Shriram Finance is well-positioned to solidify its leadership in India's competitive NBFC landscape and pursue sustained growth. The final step remains the formal closure of the transaction in 2026, pending necessary approvals.