ET reported on November 13 that Bain and Manappuram were in discussions for a potential deal.
The agreement involves Bain Capital making a fresh capital infusion through a preferential allotment, alongside a secondary sale of shares by the promoters.
The preferential allotment is anticipated to occur at a premium of approximately 12.5-15% over the current market price, while the secondary sale price is expected to range from 22.5–25% above Friday’s closing price, as per sources. The blended share price is projected to be between ₹237-240.
This transaction, which will result in Bain acquiring a quarter of the company, will be succeeded by a voluntary open offer for an additional 26% stake due to the change in control, priced similarly to the secondary share sale, according to the sources. If the open offer is fully subscribed, Bain could potentially own up to 46% of the expanded equity base, costing between ₹9,000-10,000 crore. Initially, the company may be jointly managed, but Bain is pursuing affirmative rights that would allow it to gain control over management. The Boston-based fund is also expected to appoint a new chief executive, transitioning Nandakumar and his family members into non-executive roles.
In anticipation of this transaction, Manappuram’s shares have climbed 36.67% over the past three months. However, a regulatory intervention last October, which prevented IPO-ready Asirvad Microfinance from disbursing new loans due to inadequacies in pricing and income assessment for borrowers, caused the stock price to plummet 37.5% from its 52-week peak.
Emails sent to Bain and Nandakumar on Saturday did not receive any response by the time of press on Sunday.
Throughout the years, Manappuram has engaged with several private equity and shadow banking entities, including IDFC and Poonawalla Finance, as well as private equity firms like Carlyle, to discuss potential buy-ins, business carve-outs, or even mergers, but nothing has come to fruition.
Concerns regarding Nandakumar’s succession have arisen following the appointment of his daughter, Sumitha Jayasankar, a gynaecologist, to the board as an executive director, leading many to speculate that she might be in line to succeed him.
In a Flux
As of December, Manappuram’s consolidated assets under management (AUM) rose by 9.5% year-on-year to ₹44,217 crore. However, the AUM decreased by 3.3% sequentially due to regulatory constraints on Asirvad’s growth. The core gold loan portfolio increased by 18.8% year-on-year to ₹24,504 crore, representing 55.4% of the total consolidated AUM.
Like its peers in microfinance, Asirvad is facing challenges, prompting the management to guide a shift toward secured lending, encompassing both gold and non-gold loans. The company reported a net loss of ₹189 crore in the third quarter, fueled by a rise in gross non-performing assets to 5.8%, despite writing off ₹400 crore in bad loans.
Manappuram has breached financial covenants related to its borrowings and is currently negotiating with lenders for a waiver regarding their right to demand immediate repayment. To date, no lender has sought immediate repayment due to non-compliance.
Manappuram possesses a 97.6% stake in the microfinance subsidiary, acquired and expanded in 2015 to pursue higher returns.
“Asirvad’s profitability has been impacted by collection challenges in the microfinance sector due to multiple factors, including climatic disruptions, dilution of the joint liability group model, weekend borrower discipline, and external pressures on microfinance borrowers,” Nandakumar stated during a post-earnings analyst call. “The company has implemented comprehensive corrective measures to manage costs and disbursements with stringent underwriting.”
The organized gold loan market is expected to grow to ₹15 lakh crore by March 2027, up from ₹7.1 lakh crore at the end of FY24.
Analysts at Morgan Stanley consider the company’s valuations to be attractive, with the standalone share price standing at approximately nine times the projected earnings per share for fiscal 2026, positioning it among the least expensive valuations in the industry based on return on equity.
CLSA analyst Shreya Shivani noted that stabilization of branch operations, along with favorable gold price trends, should facilitate growth recovery for Manappuram in the fourth quarter. “The company anticipates an 18% growth in gold loans for FY25, with management expecting a return to normal operations in a few quarters,” said Shivani.
