Bain Capital Nears Controlling Stake Acquisition in Manappuram Finance
Bain Capital is reportedly in the final stages of negotiating a deal with the promoters of Manappuram Finance, a gold loan provider and non-bank lender based in Kerala. The transaction aims to give Bain Capital a controlling stake in the company.
Deal Structure
The agreement being finalized involves:
- Fresh capital infusion from Bain Capital via a preferential allotment of shares.
- Secondary sale of shares by the promoter group, led by Managing Director and CEO Nandakumar VP.
The preferential allotment is expected to be priced at a premium of approximately 12.5-15% to the current market price. The secondary share sale will be priced higher, at 22.5-25% above Friday’s closing price, potentially resulting in a blended price of Rs 237-240 per share.
Open Offer and Potential Stake
Following the initial transactions, Bain Capital is expected to launch a voluntary open offer for an additional 26% stake, triggered by the change of control. If the open offer is fully subscribed, Bain Capital could potentially own up to 46% of the expanded equity capital base, with an estimated investment of Rs 9,000-10,000 crore.
Management Control and Changes
While joint operations may be considered initially, Bain Capital is seeking affirmative rights that would grant it management control. The Boston-headquartered fund also plans to bring in a new chief executive, with Nandakumar and his family members transitioning to non-executive roles.
Manappuram's Stock Performance
Manappuram’s shares have seen a rise of approximately 36.67% in the last three months due to anticipation of a transaction. However, regulatory intervention in October of the previous year, which restricted Asirvad Microfinance from fresh loan disbursements, led to a 37.5% decline in the share price from its 52-week high.
Challenges at Asirvad Microfinance
Manappuram's consolidated assets under management (AUM) grew 9.5% year-on-year to Rs 44,217 crore at the end of December. However, AUM contracted 3.3% sequentially due to the regulatory ban on Asirvad's expansion. The company suffered a net loss of Rs 189 crore in the third quarter due to a surge in gross non-performing assets (GNPA) to 5.8%.
Market Outlook
The organized gold loan market is projected to reach Rs 15 lakh crore by March 2027, from Rs 7.1 lakh crore at the end of FY24. Analysts at Morgan Stanley believe the company's valuations are cheap. CLSA analyst Shreya Shivani anticipates stabilization of branch operations and healthy gold price appreciation to support growth recovery in Q4, with Manappuram expecting 18% gold loan growth in FY25.
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