Bain Capital Set To Buy Controlling Stake In Manappuram Finance
US-based Bain Capital is set to take over a controlling stake in Manappuram Finance Ltd.
Bain Capital will buy an 18% stake in Manappuram Finance Ltd., worth Rs 4,385 crore, through a preferential allotment of shares, the gold loan firm said in an exchange filing on Thursday, adding that the private equity firm will buy 9.29 crore shares at a price of Rs 236 per share and 9.29 crore warrants in Manappuram Finance.
Bain Capital will further make an open offer for 26% of the company's public shares at the same share price, the statement said.
This is the largest such transaction involving a gold loan company. Manappuram Finance is one of the two largest gold loan firms in India, with the other being Muthoot Finance.
"This strategic investment aims to fuel the company's next phase of growth and drive transformation by enhancing operational excellence, strengthening leadership, and expanding its presence across key segments," Manappuram Finance said in a statement.
Post the transaction, Bain Capital's stake post the investment will vary between 18.0% and 41.7% on a fully diluted basis. This includes the fully convertible warrants being issued to the investor. The transaction does not involve any sale of shares by the existing promoters. The transaction is dependent on regulatory approvals and other closing requirements.
As of Dec. 31, the promoter family controls a 35.25% stake in the company, according to shareholding details available on exchanges. Foreign portfolio investors control 25.27%, while resident individuals own 18.2%.
Existing promoters will hold a 28.9% stake in the company post the investment on a fully diluted basis, Manappuram said. VP Nandakumar, the current MD and promoter of the lender will take over as executive chairman and mentor.
Under the agreement, Bain Capital and the existing promoters will have the right to nominate board members. Specifically, if both parties hold a 10% stake each, they will each be entitled to appoint two directors, the statement said. If their stakes are between 5% and 10% each, they will each be able to appoint one director. However, their respective nomination rights will lapse if their shareholding falls below 5%.
According to details provided by Manappuram Finance, Bain Capital will have the right to appoint a CEO and other key managerial personnel in Manappuram Finance and its group companies.
Bain Capital will have direct power to influence any strategic decision-making at the lender.
Founded in 1949 as a local money lender in Thrissur, Kerala, Manappuram Finance was originally started by VC Padmanabhan. Later in 1986, Padmanabhan's son Nandakumar took over control of the company and is currently recognised as the promoter of the firm.
In the third quarter, Manappuram Finance reported a net profit of Rs 278.5 crore, down 51.6% year-on-year. Its consolidated assets under management as of December 31 were at Rs 44,200 crore, which included a gold loan book of Rs 24,500 crore. Vehicle and equipment finance loans contributed Rs 5,085 crore, while the micro, small and medium enterprises portfolio accounted for Rs 3,000 crore.
Asirvad Microfinance, a wholly owned subsidiary of Manappuram Finance, had outstanding microfinance loans worth Rs 9,133 crore. The gold lender's housing finance subsidiary had a book worth Rs 1,778 crore at the end of the third quarter.
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