Negotiations between Manappuram Finance, India’s second-largest gold loan company, and Bain Capital, a leading private equity firm, have hit a roadblock due to differences over the deal’s terms. Sources indicate that the discussions, which began in early November, were aimed at Bain acquiring a controlling stake. However, disagreements have delayed the process.
Key Issues in the Deal
Bain Capital was interested in acquiring the lucrative gold loan portfolio of Manappuram Finance, which comprises ₹24,365 crore or 53% of the company’s total ₹45,716 crore assets under management as of September 30, 2024. However, the promoters of Manappuram, led by VP Nandakumar, insisted on selling the entire business, including subsidiaries, which Bain reportedly found less attractive.
The subsidiaries, which include the Asirvad Microfinance microfinance arm, have fought the crisis. Asirvad Microfinance was prohibited by the Reserve Bank of India from taking new business last October, adding to deal woes.
Bain was willing to pay a premium for the gold loan business, insiders say, but was unwilling to take along with the deal less profitable business segments that comprise microfinance at 24% of AUM, vehicle loans at 11%, housing loans at 4%, and MSME loans at 7%.
Competing Interest and Delays
Complications in the Manappuram deal are reportedly making Bain Capital deal in slow motion with interest from other banks and NBFCs. The factors make it even further less clear as sources say the future of this deal might go up in smoke with Bain possibly walking away from the deal if there is no meeting of minds on the structure.
Shares of Manappuram trade at 1.3 times their 12-month trailing price-to-book. Despite Bain seemingly willing to pay a reasonable premium for the gold loan portfolio, the promoters believe a partial sale would be unviable since residual businesses underperform.
Outlook for Manappuram Finance
Despite challenges, Manappuram Finance remains a widely held company, with foreign portfolio investors owning 28.5% and mutual funds holding 9.5% of the company as per the latest data.
For now, the deal remains in limbo as both parties assess their options. The outcome will likely hinge on whether a compromise can be reached on the scope of the acquisition.
Do you have a news tip for Lakshmishree reporters? Please email us at media@lakshmishree.com
Source: Moneycontrol
News Desk
