Bain Capital, a prominent U.S.-based private equity firm, has announced plans to acquire an 18% shares in Manappuram Finance, one of India’s leading non-banking financial companies (NBFCs), for approximately $508 million.
Overview of the Companies Involved
Bain Capital, established in 1984, is a global private investment firm managing over $160 billion in assets across various sectors, including private equity, credit, public equity, and venture capital. The firm has a strong track record of investing in financial services, healthcare, industrials, and technology, among other industries.
Manappuram Finance, founded in 1949 and headquartered in Kerala, India, is a prominent NBFC specializing in gold loans, microfinance, housing finance, and vehicle loans. The company has a vast network of branches across India and has established itself as a key player in providing financial services to underserved segments of the population.
Details of the Transaction
Bain Capital’s investment involves subscribing to Manappuram’s shares and warrants at ₹236 per share, representing a 30% premium over the company’s six-month average trading price. This strategic move is expected to trigger a mandatory open offer to purchase an additional 26% stake from existing shareholders, potentially increasing Bain Capital’s total stake to between 18% and 41.7
The infusion of capital from Bain Capital is anticipated to support Manappuram’s growth initiatives, particularly in its core gold loan segment, which accounts for approximately 75% of its revenue. Additionally, the funds may be utilized to stabilize losses in its microfinance business, which has faced challenges due to market uncertainties and regulatory issues.
Industry Context and Statistics
The NBFC sector in India plays a crucial role in the country’s financial ecosystem by providing credit to various sectors, including those underserved by traditional banks. As of 2021, the NBFC sector’s size was pegged at ₹54 lakh crore, equivalent to 25% of the asset size of the entire banking sector. Notably, India’s non-banking financial sector has grown to become the third largest globally, next only to the United States and the United Kingdom.
In the fiscal year 2023-24, NBFCs in India expanded credit strongly, with improved credit quality and strengthened balance sheets. The sector’s growth underscores its resilience and its pivotal role in facilitating financial inclusion by extending credit to key and niche sectors of the Indian economy.
This investment by Bain Capital not only signifies confidence in Manappuram Finance’s business model but also highlights the attractiveness of India’s NBFC sector to global investors. The strategic partnership is poised to enhance Manappuram’s capabilities in serving its clientele and contribute to the broader growth of the financial services industry in India.