This investment would secure MUFG a 20% stake in the company, placing it at near parity with the current promoters.
The Shriram group is a well-known player in the NBFC and other parts of the financial services industry. The group, in 2022, underwent a major corporate makeover to bring all its lending activities under Shriram Finance Ltd.
The diagram showing the structure of the group as culled out from the public sources indicates that post the restructuring exercise carried out in 2022, Shriram Capital P Ltd, has consolidated the promoter shareholding in the three major operating entities, viz., Shriram Finance Ltd (listed), and the two unlisted companies in life insurance and non-life insurance business. Their joint venture (JV) partner, Sanlam group of South Africa, also has a stake at the apex company level.
As could be seen from the group’s holding pattern, Shriram Ownership Trust (SOT) is the vehicle that holds the majority stake in the holding company of the group. This is a private trust. It is difficult to fit SOT into the common structure of a private family trust which has the members of a particular family as beneficiaries, or an employee stock option plan (ESOP) trust, that caters to allotting shares to employees.
The actual beneficiaries of the SOT are not known in the public domain. Shriram Finance does not list any individual as a promoter. It only lists SOT and various private entities in the group as the promoter group. In a sense of saying, SOT masks the individual(s) behind the group from public scrutiny.
The company convened an extraordinary general meeting (EGM) on 14 January 2026 to consider the issue of preferential shares to MUFG and related matters. The preferential offer in itself is not a subject to debate. But, the two connected proposals need some deliberation.
The first aspect is the specific rights granted to MUFG for its 20% stake. These are-
The right to nominate directors is as per the table here-
It is essential to pause at this stage to look closely at this limb of the deal.
Under the Securities and Exchange Board of India (SEBI) takeover code, the trigger for an open offer arises when the acquisition is more than 25% of the share capital. The open offer can also be triggered where the control of the board changes by virtue of any transaction, even if the shares are not acquired to the extent specified.
In the present case, the acquisition is a mere 20%. There is no question of the said clause being triggered.
However, the special rights to nominate directors and depute personnel are indicative of a level of control that is not normally associated with a mere passive financial investment.
MUFG also describes this move as a strategic partnership in its investor presentation.
An acquisition of a passive financial stake, simpliciter, may not come up with the kind of buildup that MUFG shared with its constituents, as amplified in its communication below-
Although the communication is carefully worded to avoid any hint of a direct role in management, there is enough to imply a role far beyond that of a passive investor.
Experts should debate whether sharing management and board control with the existing promoter should trigger an open offer.
The other part of the transaction structure is that MUFG would pay a non-compete fee of US$200mn (million) to Shriram Ownership Trust.
Although the arrangement is directly between the various entities of the promoter group and MUFG and Shriram Finance is not a signatory, the company proposes a resolution for the approval of its members.
This is welcome in terms of transparency and observing due governance. However, the basic transaction is unusual in character for a few reasons.
Non-compete arrangements are, typically, made when a party completely exits a company and an incoming investor needs a reasonable period to take control of the business and assume leadership.
In this case, the promoter group continues to retain a significant interest, though it reduces from about 25.4% to 20.3%, post the fresh infusion. MUFG is not presented as the new or a substituted promoter to take over the management.
There are various reasons listed for justifying the payment to the promoters for the non-compete. Before referring to those, the principal point would be that if a non-compete agreement is really necessary to prevent the promoters from competing with Shriram Finance, then the company would need to be the principal party to any such agreement and cannot be a bystander. This is the basic lacuna in the proposal.
There are nine reasons given. The gist of it is that the promoters have control over the brand ‘Shriram’ and have the wherewithal to start a lending business to compete with Shriram Finance, or to enter new lines like digital lending, which Shriram Finance may wish to explore in the future.
The reasons also imply that Shriram Finance does not retain any exclusivity in using the brand for carrying out its business.
The above reasons seem to contradict the fact that the company already pays a royalty fee to Shriram Value Services P Ltd, a promoter entity. The amount is not anything small; in FY24-25 it was ₹435 crore! This royalty was, in the past, paid to SOT directly, and subsequently, the payee has changed.
Even TCS pays a lower amount to Tata Sons for use of the brand!
How could a conflicting brand usage or a competing business by the promoters arise in this scenario? Even assuming there is some such risk, why does the company’s annual report not make due reference to it as a business risk along with other risks listed?
Even assuming the current resolution to pay the US$200mn by MUFG is withdrawn by the board, or the shareholders do not approve the same, the questions will remain valid as to the real role of the promoters with regard to the use of the brand and for carrying on the lending and associated business in the future.
In some sense, this discovery should be picked up by the market to pose questions to the board of the company. Even the board of the two insurance companies that deal with public funds owes an answer whether they are in a similar boat or not, having exclusive licence to use the brand for the insurance activities.
As an aside, MUFG in the deal-related disclosures made by it on 19 December 2025, nowhere mentions the US$200mn payable to SOT!
MUFG makes a specific mention of the founder of the group as a part of the KMP of the company. Their disclosure is shown here.
Shriram Finance Ltd does not mention its founder or their inter se relationship in public.
Is there a specific reason for MUFG to include the founder as a KMP?
Has the non-compete agreement been co-signed by the founder?
Can the US$200mn be a golden handshake payment?
(
Ranganathan V is a CA and CS. He has over 44 years of experience in the corporate sector and in consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as a senior advisor post-retirement, handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
Does the new company eventually take over the segment and in turn control the market ?
Regards
Gaurav M Rao