Bain Capital’s strategic investment to boost Manappuram Finance’s corp governance: S&P, ET BFSI
New Delhi, S&P Global Ratings on Tuesday stated Manappuram Finance Ltd’s corporate governance will get a lift from Bain Capital‘s latest strategic investment. The US-based non-public funding agency may materially affect the India-based gold financier’s technique and appoint key personnel, together with the CEO, it stated.
On March 20, Bain Capital stated it could make investments about Rs 4,390 crore to accumulate an 18 per cent stake in Manappuram, topic to regulatory approval. The stake may go as much as 41.7 per cent on a completely diluted foundation, relying on the result of a compulsory open supply.
The share of present promoter V P Nandakumar and his spouse will dilute to twenty-eight.9 per cent from 35 per cent as of end-December 2024. Nandakumar will transition to a non-executive chairman and mentor position.
“Manappuram Finance Ltd’s company governance will get a lift from Bain Capital’s latest strategic funding,” S&P World Scores stated in a press release.
S&P stated the transaction will present Manappuram with development capital to concentrate on its core product of gold-backed loans and different secured loans.
It stated Manappuram has confronted elevated reputational threat in latest instances. The Indian central bank had imposed curbs on its microfinance enterprise in October 2024.
“Given the continued stress in India’s microfinance sector and heightened regulatory scrutiny, we imagine the share of microfinance loans in Manappuram’s property below administration (AUM) may step by step cut back. We additionally see a risk that Manappuram may monetise its subsidiary Asirvad Micro Finance within the medium time period and concentrate on secured lending, topic to market circumstances,” S&P added.
As of December 31, 2024, gold-backed loans accounted for about 55 per cent of the Manappuram’s AUM, microfinance about 21 per cent, with the remaining primarily towards reasonably priced housing, car finance, and micro, small, and medium enterprises.
Individually, Fitch Ratings stated plans for Bain Capital to accumulate a stake in Manappuram Finance may assist to allay administration succession uncertainty and strengthen governance on the India-based non-bank lender.
“The brand new fairness raised ought to assist MFIN’s capital buffer and development prospects, however an meant refresh of the corporate’s govt staff may elevate continuity dangers if not easily managed. Any influence on the credit score profile might take time to materialise,” Fitch stated.
Fitch expects Bain’s involvement will help in transitioning MFIN from its higher reliance on its founder’s technique and management in direction of a extra institutionalised administration construction. This might type an vital step in resolving key-person dangers, which Fitch has recognized as a constraint for MFIN’s profile.
Nonetheless, the impact of the transaction on MFIN’s credit score profile would depend upon the experience of the refreshed senior administration staff, together with its strategic method and threat urge for food. Administration’s skill to instil extra sturdy practices and controls, whereas sustaining worker and buyer goodwill, might be key to the transaction’s success. Fitch expects such outcomes to solely emerge over time.
