Bain Capital’s Deal with Manappuram Enters Final Stage
Bain Capital, the American private equity giant, is in the final stages of negotiating a deal with Manappuram Finance, India’s second-largest gold loan company. The deal, which involves acquiring a significant part of the promoter stake, is now close to completion, according to sources familiar with the matter.
- Talks began in November 2024 with Bain Capital seeking to acquire either a complete or partial stake from the promoter family led by V.P. Nandakumar.
- The value of the deal remains undisclosed, and Bain Capital has declined to comment on the matter.
Nandakumar and his family hold 35.25% of Manappuram Finance, valued at around Rs 5,992 crore, based on the company’s current market capitalization of Rs 17,000 crore. After acquiring part of the promoters’ stake, Bain Capital is expected to make an open offer to the remaining shareholders.
- Nandakumar mentioned in an earnings call that discussions were still ongoing, but no final decisions had been made.
The deal faced delays due to differences over loss-making segments of the company, including microfinance, vehicle loans, housing loans, and MSME loans. Bain Capital showed strong interest in acquiring the gold loan business, which accounts for a significant portion of the company’s assets.
- The gold loan business contributed 55% to the total assets under management (AUM) of Rs 44,217 crore as of December 31, 2024.
- Bain Capital was reportedly willing to pay a premium for the profitable gold loan segment.
A major challenge in the deal arose from the microfinance division, particularly Asirvad Micro Finance, which has been loss-making and faced regulatory hurdles. The Reserve Bank of India had barred Asirvad from issuing loans in October 2023, citing non-compliance. The restrictions were lifted in January 2024.
- In the third quarter, the write-offs for Asirvad were Rs 400 crore, a significant increase from the previous year.
- The microfinance arm contributed 23% to the total AUM, adding complexity to the deal.
In response, Nandakumar emphasized efforts to improve Asirvad’s efficiency by tightening the underwriting process, limiting the number of lenders, and reducing loan sizes.
- He expects growth of 10-12% in the microfinance segment over the next two years, with a 99% collection efficiency.
Additionally, vehicle loans make up 12% of the total AUM, housing loans contribute around 4%, and the remaining is from MSME loans.
The deal reflects Bain Capital’s interest in the profitable gold loan business, but complexities surrounding the less profitable sectors remain a point of contention.
