Bain Capital set to acquire majority stake in Manappuram Finance in two-stage deal

After months of negotiations largely centred on valuations, a deal seems imminent in Manappuram Finance. Promoted by VP Nandakumar, who is also the MD & CEO of India’s second largest gold financier, private equity major Bain Capital is set to take majority stake in Manappuram Finance.

The deal is expected to be consummated in two tranches. In the first leg of the deal, sources familiar with the matter say Bain will acquire 22% stake from Nandakumar and his family in an all-cash deal. The deal with promoters is said to be valued at roughly 20% premium to 26-weeks average price.

Promoters will retain 10% stake in Manappuram and may hold two non-executive board positions. “Bain will take control of the business. Promoters will remove themselves from operations once their stake sale receives regulatory approvals,” said a banker who spoke on condition of anonymity.
Once this tranche is completed, which may likely take 4-6 months depending on regulatory approvals, Bain is expected to make an open offer to mop up an additional 20% stake, the pricing of which will be determined as per Sebi regulations.

The sources cited say the deal may be announced by the end of this week. Emails sent to Manappuram Finance and Bain Capital remained unanswered till publishing the article.

Nandakumar did not reply to a text message sent seeking confirmation on the deal with Bain.

Deal nuances

To put matters in perspective, Bain entered exclusive talks with Nandakumar and Manappuram for a deal in early November last year. Economic Times was first to report the story on November 13,2024 after the signing of an exclusive non-binding term sheet for the proposed deal.

However, till about January this year when Manappuram’s micro-finance arm Asirvad Micro Finance Limited came out of the embargo placed by the Reserve Bank of India, the deal had not been closed, say sources aware of the ongoing negotiations. “Initially there were uncertainties on what businesses will form part of the deal and whether the MFI subsidiary will also be bundled with the gold lender. By mid-January, these issues were ironed out,” said another banker who was part of the deal talks.

While Asirvad is a subsidiary of Manappuram, the holding company also operates in segments such as affordable housing, vehicle finance and loans against property, which will also be a part of the businesses sold to Bain.

Reluctant promoters

Then came the question of how much promoters will dilute. “Bain was clear that without a control stake, the deal isn’t accretive to them. But Nandakumar and his family wanted to retain control and operations in the company,” said another source. With control related issues prolonging, the exclusivity clause with Bain ended by mid-February this year. It was only in the last few weeks that talks were positively moving toward the direction of a deal,” said one of the persons cited above.

Sources involved in the deal talks say perhaps the complex evolving regulatory terrain and recent curb on MFI business may have also prompted Nandakumar to cash out of the business. Also, people in the industry say Nandakumar has had several deal talks with financial and strategic investors in the last 4-5 years. “At some point there was a realisation that if talks with Bain also fail, he may be left with no alternatives in the near term, especially,” said a source.

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