A downgrade in Shriram Finance’s rating is unlikely in the next twelve to eighteen months
In December last year, Shriram Finance announced that SFL MUFG Bank plans to acquire a 20 percent stake in the company through a preferential allotment of shares for about $4.4 billion. The transaction is subject to regulatory approval and is expected to close in 2026.
“The investment by MUFG Bank will deliver strategic benefits, including a stronger capital base, access to global expertise and financing channels, and will further enhance 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 to strengthen significantly following the transaction, and profitability to gradually improve as the cost of funds declines, while access to onshore and offshore financing will improve,” it added.
Given the positive outlook, Moody’s could upgrade Shriram’s rating if the company improves its net profit to average assets under management to around 3.5 percent on a sustainable basis, maintains a TCE/TMA (tangible common shares to tangible assets under management) ratio above 21 percent and maintains stable asset quality.
A downgrade in Shriram Finance’s rating is unlikely in the next twelve to eighteen months. Nevertheless, Moody’s says it may downgrade the rating if asset quality deteriorates significantly in a deteriorating business environment, resulting in lower profitability and capitalization. Specifically, a sustained increase in net charge-offs above 2.5 percent of average gross loans, or an increase in the ratio of problem loans to gross loans above 7 percent, combined with weaker access to financing or lower liquidity, will result in a rating downgrade.
Published on January 10, 2026
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