Have no interest in investing in any other arm of Shriram Group, says MUFG's Yasushi Itagaki

Speaking at a press conference announcing the Shriram Finance–MUFG partnership on December 22, Yasushi Itagaki, Group COO for Global Commercial Banking at MUFG, said the lender is “happy with its status as a significant minority stakeholder” in Shriram Finance and has “no interest in investing in any other arms of the Shriram Group.”

Mitsubishi UFJ Financial Group has no intention of investing in any other Shriram Group companies, the Japanese banking major said on December 22, underscoring its strategic partnership in India is firmly centred on Shriram Finance NBFC model.

Speaking at a press conference announcing the partnership with Shriram Finance, MUFG group COO for global commercial banking Yasushi Itagaki said the lender is “happy with its status as a significant minority stakeholder” and has “no interest in investing in any other arms of the Shriram Group”.

MUFG, which has picked close to a 20 percent stake in Shriram Finance, does not intend to raise its holding. “Right now, we have no intention of going above 20 percent,” Itagaki said, adding the Japanese lender respects local branding and that Shriram Finance’s name will remain unchanged.

The partnership is aimed at deepening wholesale and retail lending collaboration, with MUFG continuing to operate largely through branches in the wholesale segment. “We currently hope we continue to operate in wholesale through branches,” Itagaki said.

Shriram Finance has no plans to become a bank, with senior management reiterating preference to continue as an NBFC.

“Getting a banking licence is not under discussion at all. We prefer to remain where we are,” Shriram Finance executive vice chairman Umesh Revankar said.

“Us becoming a bank and servicing the same constituency is something we don’t see happening right now,” he said.

Remaining an NBFC allows greater flexibility. “Being an NBFC gives you the advantage of customisation. It is better to remain in this particular structure for as long as possible,” he said, adding there would be no structural changes following the partnership.

Shriram Finance expects its growth momentum to remain anchored in semi-urban and rural markets, with vehicle finance continuing as the core focus area.

Managing director and CEO Parag Sharma said the partnership with MUFG is expected to significantly boost retail credit growth.

“We expect retail credit to go up substantially because of this partnership,” Sharma said. The company plans to expand its product base as well as distribution capabilities, while maintaining a strong focus on vehicle finance.

“Since India is growing very fast, it gives us a large opportunity to do retail lending and there is enough scope to expand with whatever we have built,” Revankar said.

The management also pointed to recent demand uptick following changes in the Goods and Services Tax (GST) regime.

According to Revankar, the lowering of GST from 28 percent to 18 percent has led to about 15 percent incremental demand in October–November, with overall growth accelerating 20–25 percent over the past three months.

“GST has created a bigger demand. In October-November, we have seen 15 percent additional demand coming from GST,” he said, adding that growth has increased by 20-25 percent over the last three months following the GST cut.

On the operating side, Revankar noted that credit costs have declined across the NBFC sector, signalling improving borrower discipline. “Credit cost has come down for all NBFCs, which shows that there is financial discipline developing in India,” he said. The company also expects its cost of funds to come down incrementally over time.

Shriram Finance expects to maintain a strong growth trajectory, with Revankar stating that the company is targeting a 20 percent compound annual growth rate (CAGR) over the next five years.