Proxy advisory firms have thrown their weight behind Shriram Finance’s proposal to dilute equity in favour of Japan’s MUFG, offering a strong signal of institutional support ahead of the company’s shareholder vote. The endorsement is being viewed as a key development for the proposed transaction, which is set to bring in one of the largest foreign investments in India’s non banking financial sector. By backing the plan, proxy firms have underlined their confidence in the strategic rationale and long term value creation potential of the deal.
The proposal involves a preferential allotment of shares to MUFG, resulting in a significant minority stake for the Japanese financial giant. Supporters of the move argue that the capital infusion will substantially strengthen Shriram Finance’s balance sheet, improve access to diversified funding sources and enhance its ability to scale operations in a competitive lending environment. The presence of a global financial institution is also expected to bring governance discipline and international best practices, which proxy firms see as a positive for minority shareholders over the long run.
While the plan does lead to equity dilution for existing investors, advisory firms have noted that the valuation and structure of the deal appear fair and transparent. They have also addressed concerns around associated arrangements such as special rights and non compete payments, stating that these do not materially disadvantage public shareholders and are aligned with the broader strategic objectives of the partnership. In their assessment, the benefits of a stronger capital base and a high quality strategic investor outweigh the near term impact of dilution.
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