Moody’s changes Shriram Finance’s outlook to positive from stable Business News & Hub

Moody’s Ratings has affirmed Shriram Finance Ltd’s (SFL) Ba1 long-term corporate family rating (CFR). The outlook has been changed to positive from stable.

On December 19, 2025, SFL announced that MUFG Bank, Ltd. would acquire a 20% stake in the company through a preferential allotment of shares for ₹39600 crore (about $4.4 billion). The transaction 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 capitalization 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 said. 

“On a pro forma basis, the capital infusion will strengthen SFL’s tangible common equity to tangible managed assets (TCE/TMA) ratio to above 29% from around 19% as of March 2025, one of the highest amongst rated non-bank finance companies in India. We expect the company to maintain a TCE/TMA ratio above 20% over the next 4-5 years after considering the credit growth,” it added. 

“We also expect SFL’s profitability to strengthen over the next 12–18 months, supported by lower funding costs because of a gradual transmission of rate cuts by the central bank in 2025, as well as improved funding access post transaction,” it further said.

The company expects its funding costs to decline by about 100 basis points over the next 2 years. A sustained improvement in profitability is a key monitorable for the rating upgrade, the rating agency said.