A downgrade of Shriram Finance’s rating is unlikely over the next 12-18 months
Global rating agency Moody’s on January 9 changed Shriram Finance’s rating outlook to ‘positive’ from ‘stable’ and affirmed Ba1 long term corporate family rating (CFR) for the non-banking finance company (NBFC), citing strategic benefits the company will have because of MUFG Bank’s presence as a major investor.
On December last year, Shriram Finance announced that SFL MUFG Bank plans to acquire a 20 per cent stake in the company through a preferential allotment of shares for about $4.4 billion. The transaction is subject to regulatory approvals and is expected to close in 2026.
“The investment by MUFG Bank will provide strategic benefits, including a stronger capital base, access to global expertise and funding channels, and will further improve SFL’s funding diversity and risk management practices over time,” Moody’s said.
“The positive outlook reflects our expectation that SFL’s business and financial profile will strengthen, supported by a strong strategic shareholder and a significant capital increase. We expect the company’s capitalisation will materially strengthen after the transaction, its profitability to gradually improve as its cost of funds declines, while its access to onshore and offshore funding will improve,” it added.
Given the positive outlook, Moody’s could upgrade Shriram’s rating if the company improves its net income to average managed assets to around 3.5 per cent on a sustained basis, maintains a TCE/TMA (tangible common equity to tangible managed assets) ratio above 21 per cent and maintains stable asset quality.
A downgrade of Shriram Finance’s rating is unlikely over the next 12-18 months. Nevertheless, Moody’s said it can downgrade the rating if its asset quality deteriorates significantly amid a worsening operating environment, resulting in lower profitability and capitalisation. Specifically, a sustained increase in its net charge-offs to above 2.5 per cent of its average gross loans, or an increase in its problem loans to gross loans ratio above 7 per cent, combined with weakening access to funding or lower liquidity, will result in a rating downgrade.
Published on January 10, 2026
