Bain Capital's Stake Buy In Manappuram Finance To Strengthen Governance, Says Fitch Rating
The transaction is subject to regulatory and other approvals. It is expected to be completed by the end of 2025.
Bain Capital acquiring stake in Manappuram Finance Ltd. could help in reducing worries regarding management succession uncertainty and strengthen governance of the India-based non-bank lender, Fitch Ratings said. Bain Capital will accumulate an 18% stake in Manappuram Finance along with a possibility of acquiring a higher stake.
The transaction is subject to regulatory and other approvals. It is expected to be completed by the end of 2025.
The stake purchase will give Bain Capital joint control and the right to nominate two board directors and key management personnel, the rating agency said. V.P. Nandakumar will remain in a non-executive position, providing leadership continuity. Bain Capital's role in board and management selection could expand the executive talent pool and gradually strengthen governance and compliance, the rating agency said.
However, the intended rejig of the company's executive team could raise continuity risks if not smoothly managed. Any impact on the credit profile may take time to materialise, the agency said. The new equity raise will support Manappuram Finance's capital buffer and growth prospects.
The management transition effect on Manappuram Finance's credit profile depends on the expertise of the refreshed senior management team and their strategic approach and risk appetite. In case the management instils more robust practices and controls, while maintaining employee and customer goodwill, it will be the key proof of the transition's success, Fitch Rating said.
Both Bain Capital and Manappuram Finance emphasised their intention to boost growth in crore product segments, such as gold-backed lending. Branch expansion and efforts to increase employee productivity can also be part of the growth strategy. Fitch Rating Agency expects growth in riskier unsecured microfinance loans to remain slow in the near term.
The proposed joint control structure, along with Nandakumar and family retaining a 29% stake after dilution, may not trigger a change of control under the US dollar bond documents, Fitch Ratings said.
