MUFG Plans ₹12,000 Cr Investment to Acquire Stake in HDB Financial
The Japanese banking giant seeks up to 19% in HDFC Bank’s NBFC arm, signaling confidence in India’s evolving financial services landscape.
MUFG Returns to the HDB Negotiation Table with a Renewed Offer
Japanese banking giant Mitsubishi UFJ Financial Group (MUFG) has resumed talks with a proposal to invest nearly ₹12,000 crore (around $1.7 billion) in HDB Financial Services, signaling renewed interest in expanding its footprint in India’s financial services sector, which functions as the non-deposit-taking financial arm of HDFC Bank. The offer is for a stake between 17% and 19%, underscoring MUFG’s renewed commitment to expand its footprint in India’s fast-growing financial sector.
This development marks MUFG’s second serious attempt to acquire equity in HDB Financial. A previous effort fell through due to differences in valuation expectations. However, the current round of discussions is said to be far more aligned, with the deal possibly concluding within the next few weeks, pending regulatory clearance.
Revised Valuation Reflects Financial Realities
A major shift in the ongoing negotiations is HDB Financial’s revised valuation. The initially anticipated valuation, hovering between $10 billion and $12 billion, has now been revised to a range of $8 billion to $8.5 billion. This adjustment reflects broader market dynamics and a recent dip in HDB’s financial performance.
In the final quarter of the fiscal year, the company posted a net profit of ₹530.9 crore, a decrease from ₹656 crore in the corresponding period last year. Concurrently, a crucial metric for impaired loans, gross stage 3 assets, experienced an uptick, moving from 1.90% to 2.26%, while the profitability of the assets under management saw a decline from 3% to 1.8%. These figures likely influenced the renegotiated valuation and may have brought the two parties closer to agreement.
Timing the Deal Ahead of the IPO Mandate
The timing of MUFG’s potential investment is noteworthy. The Reserve Bank of India has mandated that large NBFCs like HDB Financial must go public by September 2025. As this mandated timeframe draws nearer, HDB Financial Services is actively preparing for its debut on the public stock market through an initial share sale.
The proposed capital infusion from MUFG could play a critical role in strengthening the company’s balance sheet and enhancing investor confidence ahead of the public listing. Currently, HDFC Bank owns a 94.6% stake in HDB Financial, with the remainder held by employees through stock options. If the deal proceeds as planned, it would reduce HDFC Bank’s stake and introduce an international partner into the ownership structure, potentially improving corporate governance and global investor sentiment.
Strategic Win for Both Sides
For MUFG, the deal offers a strategic entry into one of India’s most promising financial services segments. The Japanese bank has been actively seeking to expand in emerging markets, and this move aligns well with its long-term growth strategy. India’s vast and under-penetrated credit market makes it a lucrative destination for foreign investors looking to diversify.
From HDB’s perspective, the deal brings in a globally recognized partner with deep financial expertise. Beyond capital, MUFG could offer operational insights, risk management practices, and access to global capital markets—factors that could be invaluable as HDB prepares for its IPO and future expansion.
Industry-Wide Implications
If finalized, the MUFG-HDB deal would be among the largest foreign investments in India’s NBFC space in recent years. It could also set a benchmark for valuation and structure for similar deals going forward. The development signals a strong vote of confidence in India’s NBFC sector, which continues to play a critical role in financial inclusion and credit delivery.
Moreover, such a partnership might encourage other global financial institutions to explore strategic investments in Indian financial firms, especially as the regulatory environment becomes more structured and transparent.
Final Thoughts: A Strategic Partnership with Far-Reaching Impact
MUFG’s intent to invest ₹12,000 crore in HDB Financial Services marks more than just a high-value deal—it symbolizes the growing global interest in India’s financial services industry. With regulatory changes shaping the future of NBFCs and demand for retail credit on the rise, this deal is poised to provide HDB with the financial muscle and strategic support it needs at a pivotal time.
For MUFG, it’s an opportunity to deepen its presence in India, while for HDFC Bank, it offers a path to diversify HDB’s ownership and boost credibility ahead of a much-anticipated IPO. As this potential partnership takes shape, it may well become a defining moment in the evolution of India’s NBFC sector.
The image added is for representation purposes only
