A landmark deal is set to reshape the Indian financial landscape as Bain Capital, a US-based private equity firm, moves to acquire a controlling stake in Manappuram Finance Ltd., one of India's leading gold loan providers. Through this transaction, Bain Capital will purchase an 18% stake in Manappuram Finance via preferential allotment of shares valued at Rs 4,385 crore. The acquisition also includes warrants convertible into additional shares, potentially increasing Bain's ownership up to 41.7% on a fully diluted basis. This strategic move aims to bolster operational efficiency, strengthen leadership, and expand Manappuram’s presence across various segments, marking the largest transaction involving a gold loan company to date.
The acquisition involves Bain Capital purchasing 9.29 crore shares at Rs 236 per share, along with equivalent warrants. Following this initial investment, Bain plans to extend its control by making an open offer for an additional 26% of the company's public shares at the same price. This strategic partnership seeks to propel Manappuram Finance into a new era of growth while maintaining continuity under current leadership. VP Nandakumar, the incumbent Managing Director and promoter, will transition into the role of Executive Chairman and mentor, ensuring a smooth transition.
Manappuram Finance was founded in 1949 by VC Padmanabhan as a local money lender in Thrissur, Kerala. Under the guidance of Padmanabhan's son, Nandakumar, who assumed control in 1986, the company has grown significantly. Despite reporting a net profit decline of 51.6% year-on-year in the third quarter, standing at Rs 278.5 crore, Manappuram Finance continues to manage substantial assets. As of December 31, its consolidated assets under management were Rs 44,200 crore, inclusive of a Rs 24,500 crore gold loan portfolio. Additional contributions come from vehicle and equipment finance loans (Rs 5,085 crore) and the micro, small, and medium enterprises portfolio (Rs 3,000 crore).
Under the terms of the agreement, Bain Capital secures significant influence over strategic decision-making processes within Manappuram Finance. The private equity firm gains the authority to appoint a CEO and other key managerial personnel across Manappuram Finance and its subsidiaries. Furthermore, both Bain Capital and the existing promoters retain rights to nominate board members based on their respective stakes. If either party holds between 5% and 10%, they can appoint one director; holding over 10% allows for two directors. Should their stakes fall below 5%, nomination rights cease.
This transformative alliance positions Manappuram Finance for enhanced growth prospects. With Bain Capital's expertise and resources, coupled with continued involvement from the founding family, the company is poised to expand its footprint and solidify its market position. The transaction remains contingent upon regulatory approvals and closing conditions, promising a pivotal chapter in Manappuram Finance's history as it navigates evolving industry dynamics.