Here's what led to a sharp surge in Shriram Finance shares post the MUFG deal

Shares of Shriram Finance Ltd

., the Nifty 50 constituent and non-bank lender saw a sharp surge after the deal announcement with MUFG, wherein the latter will be investing a sum of ₹39,620 crore to acquire up to 20% stake.

Multiple factors led to a surge in the Shriram Finance stock price, which has already risen 50% so far in 2025, making it the best calendar year for the stock since 2017.

First, Shriram Finance will be issuing shares to MUFG at a price of ₹840.9 per share, which is a discount of just under 3% compared to the closing price on Thursday.

The discount is a lot lower, compared to the other financial transactions this year, such as the RBL Bank-Emirates NBD Deal, which took place at a 6.5% discount, Sammaan Capital-IHC deal, which happened at a steeper discount of nearly 18%, and the IDFC First Bank deal, which happened at a 5% discount.

Second, the deal will value Shriram Finance at a post-money valuation of 1.9 times one-year forward estimated price-to-book value, which is significantly lower compared to its nearest peer Cholamandalam, which trades at over 4 times book.

Third, the capital infusion will provide Shriram Finance opportunities for transactions with MUFG's broad consumer network, bring down its credit costs, and also increase the chance of a credit rating upgrade, which could aid in bringing down costs further.

The growth capital will also be instrumental for Shriram Finance's CV and MSME businesses.

"Shriram Finance trades at three times book and including this - ₹39,000 crores, their net worth will move up to close to ₹90-92,000 crores, which makes it more capitalised than several banks. In fact, even the large private sector banks aren't capitalised to this extent other than maybe the top four," N Jayakumar of Prime Securities told CNBC-TV18.

Shares of Shriram Finance are trading 3% higher after the deal announcement at ₹895.95.