MUFG support may lower Shriram’s risky loans over time: report

It enhances Shriram’s access to capital and funding markets over time, said CreditSights.

MUFG’s investment in Shriram Finance enhanced the Indian financial services firm’s access to capital and is expected to reduce risky loans over time.

Shriram Finance is likely to enjoy external support from MUFG in a stress scenario, said CreditSights, a Fitch Solutions Service.

The MUFG connection also enhances Shriram’s access to capital and funding markets over time. This eases funding costs and allows the company to cross-sell lower-yielding, less-risky new vehicle loans, the report said.

It also supports Shriram’s risk-adjusted net interest margin (NIM) and profitability.

Geopolitical developments in the Middle East are unlikely to stop Shriram Finance from outperforming, said CreditSights.

“[Whilst] we see higher energy costs and second-round effects inevitably passing through to inflation and weighing on growth as the conflict prolongs, leading to slower loan growth and higher credit costs,” it said.