Fitch Ratings on Tuesday said significant ownership by foreign shareholders can be positive for Indian financial institutions' credit profiles through long-term capital, as well as lifting of governance standards in some cases. According to reports from The Hindu BusinessLine, the rating agency noted that foreign interest is not in itself a reliable signal of stronger credit fundamentals, but transactions that strengthen internal controls, risk management and leadership accountability can be more credit-relevant than those purely for financial gains.
Fitch said recent greater interest from foreign investors indicates their rising confidence in India's long-term growth prospects, the financial sector's regulations and oversight and improved risk governance. As reported by The Hindu BusinessLine, the rating agency believes investors will seek platforms with scalable distribution and local expertise, with acquirors from developed markets potentially introducing enhancements in risk controls and board oversight. The presence of reputable strategic shareholders can potentially ease the cost of capital for these institutions.
According to Fitch's analysis, Bain Capital's partial acquisition of Manappuram Finance in 2026 gives it joint control and the right to nominate two board directors and key management personnel, which could support Manappuram's management, governance and business profile. However, as reported by The Hindu BusinessLine, any impact on the credit profile will take time to materialise and be subject to execution risk.
Fitch believes there is more scope for foreign shareholders to gain control of non-bank financial institutions (NBFIs) than banks, as regulations allow up to full foreign ownership of NBFIs. According to reports from The Hindu BusinessLine, the rating agency cited the example of Sumitomo Mitsui Financial Group bought 100 per cent of Fullerton India Credit Company (now SMFG India Credit), resulting in increased board and management representation, along with sales and funding synergies. These factors can contribute towards strengthening the financial institutions' standalone credit profile.
