Mitsubishi UFJ Financial Group's (TYO:8306) 680 billion yen investment in India-based Shriram Finance (NSE:SHRIRAMFIN, BOM:511218) could result in long-term, sustainable growth, S&P Global Ratings said in a recent release.

The deal could provide growth opportunities and diversification benefits for the Japanese banking group, S&P said.

India's retail financing segment could allow the group to bolster its Asian business platform, an area it is focusing on, the rating agency said.

The transaction also supports the group's goal to improve its profitability.

However, Shriram Finance's business may yield less stable earnings, partly due to high credit costs, and greater economic risks compared to those in Japan, the rating agency stated.

Given that it would take longer for Shriram Finance to add to the group's profitability, growth in the existing business should aid in efforts to raise return on equity toward the 12% target, S&P said.

The rating agency expects MUFG to sustain growth investment while keeping a strong financial base, given capital accumulation from steady earnings.