Recently there is a lot of discussion on FDI. The bill for 100 percent FDI in the insurance sector has been passed in the Parliament. But the news that we have brought for you is not related to the insurance sector but to the financial sector. Where record FDI has come. According to experts, Japanese company Mitsubishi UFG Financial Group (MUFG) is going to invest more than 4.45 billion dollars i.e. 40 thousand crore rupees for 20 percent stake in India’s second largest non-banking financial company (NBFC) Shriram Finance. On Friday i.e. today the director of Shriram Finance can give the green signal to this deal.
The company meeting is going to take place. On Tuesday, a proposal was sent to the NBFC from the Japanese side. If the local NBFC gives the nod to this proposal, then it will be the biggest ever FDI in this sector. Recently, banking regulator RBI has made important changes in the rules. RBI has said that now banks can hold equity stake in NBFCs. After that, investment of Japanese banks in NBFCs is considered very important. Talks were going on between the two since the month of June.
investment of 40 thousand crore rupees
According to media reports, ever since the talks regarding the deal started, the share price of Shriram Finance has seen a rise of 42 percent. As per the agreement, Japan’s largest bank, MUFG, will invest Rs 40,000 crore ($4.45 billion) as primary capital. There will be no secondary sale of shares by any investor. According to experts, MUFG will pay Rs 842 per share, which is 3.44 percent less than Thursday’s closing price of Rs 869.20. This takes its market cap to Rs 1.63 lakh crore, second only to Bajaj Finance among shadow lenders, and more than double the market cap of private banks like Yes Bank, RBL, IDFC First and IndusInd Bank.
Who invested how much in Shri Ram?
After the investment, the stake of promoter Shriram Ownership Trust and South Africa’s Sanlam will reduce to 20.05 per cent from the current 25.39 per cent. The trust holds most of its shares through the group’s holding company Shriram Capital. The remaining shares are held by the general public and institutional shareholders, which include the Government of Singapore (4.73 per cent), Kotak Mahindra MF (2.09 per cent), Fidelity (1.14 per cent) and the Monetary Authority of Singapore (1.07 per cent). Shriram Capital also has a stake in the parent company’s insurance joint venture with Sanlam. There will be no change in the existing management and promoter group including the CEO and Chairman. MUFG will initially get two seats in the board. However, the company wants to achieve majority by increasing its stake by making an open offer in the future. No official statement has been given by MUFG and Shriram Finance.
Tried to buy HDB
A team of senior people from MUFG is visiting India on this occasion and will meet Prime Minister Narendra Modi to reiterate Japan’s commitment towards India. This is the second investment announcement by a Japanese financial services company within a week. On Wednesday, Mizuho announced its long-awaited acquisition of fast-growing investment banking franchise Avendus. Daiwa announced its third investment in Ambit, while SMBC in May bought 20 per cent stake in Yes Bank from an SBI-led investor group for $1.6 billion. This is MUFG’s second attempt to acquire a major stake in India’s fastest growing non-government financial company (NBFC). Last year, its attempt to acquire a $2 billion stake in HDB Financial Services failed. HDB Financial is a listed NBFC branch of HDFC Bank.
How were the quarterly figures?
Shriram Finance had given loans of Rs 43,019 crore in the second quarter of the financial year, which is 10.24 percent more than last year. This growth is due to increase in sales of commercial vehicles, three wheelers, two wheelers and tractors. Umesh G Revankar, executive vice president, Shriram Finance, in an earnings call on October 31, expressed hope of continuation of the second quarter momentum and improvement in the passenger vehicle segment. The NBFC lender’s net profit increased by 11.4 percent to Rs 2,307 crore in the second quarter. This led to improvement in earnings per share and it increased to Rs 12.27 from Rs 11.02 in the same period last year.