After three months of negotiations, Kerala-based gold loan provider and non-banking financial company (NBFC) Manappuram Finance is close to finalizing a deal with American private equity giant Bain Capital.
The deal will see Manappuram's promoter group, led by Managing Director and CEO V.P. Nandakumar, selling its majority stake in the firm, according to media reports. The promoter group holds a 35.25% stake in Manappuram Finance, valued at approximately Rs 5,992 crore based on the company's market capitalisation of Rs 17,000 crore.
If the deal goes through, it could reportedly be followed by a voluntary open offer by Bain Capital for an additional 26% stake in Manappuram Finance. According to The Economic Times, the Boston-based PE firm may end up owning as much as 46% of the company through a combination of fresh capital infusion via a preferential allotment and a secondary share sale by the promoters.
Shares of Manappuram Finance Ltd were trading 2.91% higher at Rs 206.7 at 11:21 AM.
RBI Action on Asirvad Micro Finance Delayed the Deal
In the February 13 earnings call with analysts, Manappuram’s CEO Nandakumar addressed the reported talks with Bain, stating:
"It is quite common to have discussions, but discussions don’t mean that we have reached anywhere."
Earlier reports indicated that negotiations between Bain and Manappuram faced hurdles over deal terms. Bain was reportedly only interested in the Kerala-based firm's profitable gold loan business.
However, the promoter group insisted on selling major stakes not just in Manappuram Finance but also in its subsidiary businesses, which include vehicle loans, housing loans, MSME loans, and microfinance.
A major sticking point was Asirvad Micro Finance, Manappuram’s microfinance subsidiary. The IPO-bound subsidiary was barred by the Reserve Bank of India (RBI) from sanctioning and disbursing loans effective October 21 last year due to non-compliance with regulatory guidelines. The RBI raised concerns over “usurious” pricing and excessive mark-ups over funding costs. These restrictions were lifted only on January 8 this year.
In the third quarter, Manappuram’s net profit halved to Rs 282 crore, while Asirvad’s bad loans and provisions surged fourfold to Rs 473 crore.
Manappuram’s consolidated assets under management (AUM) grew 9.5% year-on-year to Rs 44,217 crore in the December quarter, with Asirvad Micro Finance contributing around 23% (Rs 10,013 crore) to the total AUM.
