Manappuram surges 7%; nears record high on strategic deal with Bain Capital

A strategic deal with Bain Capital Asia, which will invest Rs 4,385 crore through a preferential allotment at Rs 236 per share, at a premium of 30%, will give it an 18% stake in the company

Shares of Manappuram Finance jumped over 7 per cent on Friday after the company informed the exchanges that Bain Capital will be investing ₹4,385 crore to acquire 18 per cent stake in the company. The move will help the US private equity firm gain control over the gold loan provider, and ease its management succession plans. 

Bain Capital will subscribe to Manappuram’s shares and warrants at ₹236 apiece, at a 9 per cent premium over the stock's closing price on Thursday of ₹217.5. 

After the investment, which is valued at $508 million, Bain Capital will jointly control Manappuram with other large shareholders, termed as 'promoters' under regulations. 

Manappuram’s shares rose 7.7 per cent to settle at ₹ 234.4, their highest level on record. 

Bain Capital has a strong history of scaling businesses in India, with previous successful partnerships including 360 One WAM, L&T Finance, and Axis Bank in the financial services sector. 

Analysts at ICICI Securities believe the deal will improve operational efficiencies and governance within the company. 

“As we embark on the next phase of our growth, we are delighted to welcome Bain Capital as our new partner. Their leadership team is renowned for its commitment to excellence, and their sharp focus on growth will unlock fresh opportunities for Manappuram Finance. We look forward to a successful partnership that drives innovation and sustained success,” said V-P Nandakumar, managing director and chief executive officer of Manappuram Finance.  

The board will be reconstituted as part of the deal, and Nandakumar will continue to guide the team in his role as “non-executive chairman & mentor”.  

Meanwhile, CLSA has raised its target price for Manappuram Finance shares to ₹270 apiece, maintaining an ‘outperform’ rating, while DAM Capital has raised its target price to ₹255 with a ‘buy’ rating. 

 

This substantial capital infusion is expected to bolster Manappuram Finance’s financial position, allowing the company to enhance operational efficiencies and expand in key segments, such as gold loans, vehicle finance, MSME lending, and microfinance. 

The strategic partnership with Bain Capital will provide the guidance and expertise needed to drive the company's next phase of growth, according to analysts at Motilal Oswal Financial Services. 

While the strategic shift and new partnership are promising, analysts note that the success of the transformation will depend on Bain Capital’s ability to navigate the company’s entrenched culture and processes. 

The first step in this process will be the appointment of a professional CEO to drive the company’s turnaround, the brokerage firm said. 

Investors will be closely watching how the company executes this transformation as they evaluated its long-term growth potential beyond the open offer price of ₹236 apiece.