Fitch Ratings has placed Shriram Finance’s Long-Term Foreign and Local Currency Issuer Default Ratings (‘IDR’) of ‘BB+’ and Short-Term IDR of ‘B’ on Rating Watch Positive (RWP). The move follows an agreement where MUFG Bank, Ltd. will acquire a 20% stake in Shriram Finance. Fitch believes SFL’s rating could benefit from this strategic investment, potentially leading to a one-notch uplift to its Standalone Credit Profile (SCP).
Rating Upgrade on the Horizon
Fitch Ratings has announced it has placed Shriram Finance’s Long-Term Foreign and Local Currency Issuer Default Ratings (‘IDR’) of ‘BB+’ and Short-Term IDR of ‘B’ on Rating Watch Positive (RWP), signaling a potential upgrade. This announcement, dated January 21, 2026, indicates a positive shift in Fitch’s outlook for Shriram Finance’s creditworthiness.
Rationale for the Rating Watch
The Rating Watch Positive designation is a direct consequence of the agreement under which MUFG Bank, Ltd., a subsidiary of Mitsubishi UFJ Financial Group, Inc. (MUFG), will acquire a 20% stake in SFL. Fitch believes this strategic investment from a stronger long-term shareholder could improve SFL’s standalone credit profile (SCP).
Potential Benefits from MUFG Stake
According to Fitch, SFL’s rating could benefit from a one-notch uplift to its Standalone Credit Profile (SCP) to reflect the strategic investment from a stronger long-term shareholder. Fitch expects to resolve the RWP once the transaction is completed, which SFL anticipates in 2026.
Key Factors Driving the Potential Upgrade
Fitch highlights several factors that support a potential rating upgrade. The company will retain primary control over its strategy and operation. Fitch expects to rate SFL one notch above its SCP to reflect improved prospects of external support from MUFG in times of need. MUFG’s consolidated credit profile is stronger than that of SFL and Fitch believes the investment is strategic and long-term, with MUFG expected to generally align with SFL’s strategic priorities and governance standards and benefit from modest funding support.
Possible Downside Risks
Fitch notes that the ratings could be downgraded if the operating environment weakens materially, if asset quality and profitability significantly decline, or if funding becomes tighter, more concentrated, or if liquidity deteriorates. Leverage persistently above 5x or significant risk-taking could also negatively impact the rating. The rating would be removed from RWP and placed on Stable Outlook if the transaction is no longer expected to complete.
Source: BSE
