Moody's upgrades Shriram Finance outlook to positive, affirms Ba1 rating

Moody's Ratings has revised Shriram Finance Limited’s (SFL) outlook from stable to positive while affirming its long-term corporate family rating (CFR) at Ba1.





The rating action follows Shriram Finance’s

announcement that MUFG Bank plans to acquire a 20% stake in the company through a preferential allotment of shares worth ₹4.4 billion (approximately $296 million).

The transaction, subject to regulatory approvals, is expected to close in 2026.

Moody’s noted that the investment from MUFG Bank will provide strategic benefits, including a stronger capital base, access to global funding channels, and support for improving SFL’s funding diversity and risk management practices.

Moody’s stated that the positive outlook reflects expectations that SFL’s business and financial profile will strengthen, supported by a strong strategic shareholder and a significant capital increase.

The agency expects the company’s capitalisation to materially improve post-transaction, allowing profitability to gradually rise as its cost of funds declines while maintaining access to onshore and offshore funding.

The rating agency also highlighted that SFL’s capital infusion will increase its tangible common equity to tangible managed assets to one of the highest among non-bank finance companies in India by March 2025.

SFL’s company-level metrics, including capital to risk-weighted assets, are expected to remain above 20% over the next four to five years.

Moody’s further noted that SFL’s profitability is likely to strengthen over the next 12–18 months, driven by lower funding costs and gradual transmission of central bank rate cuts. The company’s operating leverage and improved funding access are also expected to support its performance.

SFL’s debt maturity coverage ratio is forecasted to rise above 90% from 31% as of March 2025, and the company is expected to reduce reliance on short-term debt while using new funds to originate loans.

Asset quality is also projected to remain stable over the next 12–18 months, underpinned by robust lending and collection processes, a stable macroeconomic environment, and a high proportion of collateralised loans.