(Reuters) -Japan’s Mitsubishi UFJ Financial Group is in advanced talks to buy a 20% stake in Indian non-banking finance company Shriram Finance for 232 billion rupees ($2.61 billion), the Economic Times reported on Wednesday, citing people familiar with the matter.
A deal would mark the latest move by a Japanese financial institution to acquire a stake in an Indian firm, following the banking arm of rival Sumitomo Mitsui Financial Group building a 24.2% holding in Mumbai-based Yes Bank.
Facing a shrinking domestic market and years of rock-bottom interest rates, Japan’s biggest banks have enthusiastically sought out targets overseas over many years.
MUFG – Japan’s largest lender by assets – owns a 23.62% stake in Wall Street investment bank Morgan Stanley.
The Japanese bank declined to comment on the report, while Shriram Finance did not immediately respond to a Reuters request for comment.
The investment will be through a primary issuance via a preferential allotment and will not entail any secondary sale of shares, the newspaper said, adding that both MUFG and Shriram Finance have signed an exclusivity agreement on negotiations.
The Tokyo-based banking leader is, however, not averse to taking a higher stake in the company or even a controlling interest, over time, the report said.
Shriram Finance reported an 8.8% year-on-year rise in standalone profit at 21.56 billion rupees for the quarter ended June 30. Its results were slightly below the analysts’ average estimate of 21.91 billion rupees, according to data compiled by LSEG.
($1 = 88.8040 Indian rupees)
(Reporting by Gnaneshwar Rajan, Mrinmay Dey in Bengaluru and Anton Bridge in Tokyo; Editing by Subhranshu Sahu and Muralikumar Anantharaman)
