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Japan-based Mitsubishi UFJ Financial Group (MUFG) and the State Bank of India (SBI) have entered into a strategic partnership to structure and finance projects for Indian and global clients. The collaboration will focus on mergers and acquisitions (M&A), real estate financing, trade finance, and retail banking solutions. The move comes after the Reserve Bank of India allowed domestic banks to fund up to 75% of corporate acquisitions starting April 1. By combining SBI's domestic presence with MUFG's global network, the partnership aims to support Japanese companies investing in India and Indian firms expanding abroad, while also exploring opportunities with mid-sized companies and MSMEs.
Japanese banking major Mitsubishi UFJ Financial Group (MUFG) and India's largest public sector lender State Bank of India (SBI) have formed a strategic partnership to structure and finance projects for clients in India and overseas markets. The alliance will focus on funding mergers and acquisitions (M&A), real estate projects and other corporate financing requirements for Indian and international businesses. Advertisement
The development follows regulatory changes introduced by the Reserve Bank of India that allow domestic lenders to finance corporate acquisitions. Under the new framework, which will come into effect on April 1, banks will be permitted to fund up to 75% of the value of acquisition deals involving listed and unlisted companies. The revised rules will also allow lenders to finance acquisitions worth up to 20% of their eligible capital base. The policy is expected to open new credit growth opportunities for Indian banks and encourage larger participation in deal financing.
Through the partnership, SBI's strong domestic presence and leadership in the Indian banking market will be combined with MUFG's international network and expertise in structuring cross-border transactions. The two lenders indicated that the collaboration aims to support Japanese companies expanding their operations in India while also assisting Indian companies looking to grow internationally, including entry into Japan and other overseas markets.
The joint initiative will also focus on advisory services for mergers and acquisitions, trade finance solutions and retail banking support for transactions involving Japanese companies operating in India or investing in Indian businesses. Both banks also plan to introduce Indian mid-sized corporates and micro, small and medium enterprises to Japanese corporate clients in order to identify business and financing opportunities.
Reports had earlier indicated that SBI had been exploring partnerships with Japanese lenders to expand its role in M&A financing. The tie-up with MUFG is expected to strengthen that effort, particularly as cross-border deals involving Indian companies continue to increase.
MUFG already has a strong presence in financing major acquisition deals involving Indian firms. The bank previously underwrote transactions such as Tata Motors acquisition of the commercial vehicle business of Iveco Group valued at 3.8 billion euros. It was also involved in financing Schneider Electric SE's purchase of a 5.5 billion euro stake in its Indian joint venture from Temasek Holdings.
Apart from deal financing, the Japanese financial services group has also been increasing its investment exposure in India's financial sector. MUFG is currently in the process of acquiring a 20% stake in Shriram Finance, which is expected to be among the largest foreign investments in India's non-bank financial services segment.
Source Reuters
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