Bain Capital Acquires Major Stake in Manappuram Finance

Shareholders of Manappuram Finance have quite a few reasons to rejoice.

First and foremost, the gold loan NBFC's stock price seems to be holding steady even as the banking sector and the major benchmark indices are collapsing.

Since the beginning of 2025, Manappuram has delivered stellar returns of over 15%, whereas the Nifty 50 has tumbled over 10% from its peak. Meanwhile, its closest competitor, Muthoot Finance, has also fallen by over 9% since January, unlike Manappuram.

Two factors seem to be working in consonance, helping Manappuram's stock price gallop: First is the meteoric spurt in gold prices, and the second one is the stake acquisition by Bain Capital—a private equity firm—in the gold lender.

These two drivers, combined, have put Manappuram Finance firmly in the Goldilocks zone, which explains why several brokerage houses are positive about the company’s performance in the coming quarters. 

Let's break it down.

Gold Glitter and the Safe Haven Effect

Since January, the gold rate per 10 grams has leapfrogged by over 18%, zooming from the levels of ₹77,000 to ₹91,500+. Thanks to a global economic macro environment ruffled by volatility and tariff terror, gold's reputation as a safe haven is being reconfirmed. If you need any proof of gold's everlasting appeal, look at the bullish estimate being pushed out by quite a few analysts, one even believing that gold could soar to as high as $4,000 by the end of FY25. 

But why is the gold price surge such a major positive for Manappuram Finance?

For that we need to understand Manappuram's business model as a gold-lending NBFC. 

It is a pretty straightforward banking business model, where the company accepts gold assets as collateral for small-ticket home loans, vehicle loans, MSME and housing finance loans.

The company also runs another subsidiary, Asirwad Microfinance, which primarily caters to the credit needs of the marginalised. 

Today, Manappuram’s consolidated AUM—spanning portfolios of gold, vehicle lending, MSME, and Asirvad—stands at an impressive ₹44,217 crore. The company has over 5,300 branches across India and an employee workforce of over 50,000 people.

As of Q3FY25, it safely kept around 57 metric tons of household gold jewellery on behalf of 2.6 million active customers.

Now, back to the question at hand: 

How do rising gold prices benefit Manappuram?

Let’s imagine for a moment that you are one of the bigwigs running Manappuram Finance.

With gold prices rising, you will now be able to give a larger loan amount to borrowers (with a strong credit record) for the same amount of gold. Of course, factors like the borrower’s risk profile will also be used to determine the loan-to-value ratio, a metric used to assess the percentage value of the loan disbursed vis-a-vis the gold pledged.

Simply put, if a borrower pledges gold worth ₹1,00,000 and the LTV ratio of Manappuram is 65%, then the borrower will receive ₹65,000. In case the borrower has a strong credit track record and is seeking, say, 75% of the LTV, then the loan disbursal officer could give the borrower ₹75,000 but at a higher interest rate.

Nevertheless, with rising gold prices, there is always an additional incentive for a borrower: He will be keen on repaying the loan and taking repossession of his gold, which is likely to rise in value, instead of letting the company auction it. This is a win-win for both the lender and the borrower, as the company's NPA levels will start plummeting because borrowers wouldn’t want their gold auctioned.

There is another intriguing nuance to pledging gold in India. In a recent conference call, CEO VP Nandkumar clarified that most gold loan borrowings happen in India, not because of a surge in gold prices or a high LTV ratio but to tide over pressing cash crunches.

According to Nandkumar, the majority of common borrowers redeem their gold loans within 3-4 months. What's more, they only opt for a gold loan when they have a “clear anticipation of their upcoming cash flow.”

Nandkumar pointed out that the business grows because customers are looking to tide over their expenses for events like sowing and harvesting season, school or college admissions, etc. Once these seasons pass, the business's growth slows down.

Bain Capital Acquisition

It is as though the Bain Capital acquisition has set the Manappuram Stock on fire.

In the week ending Friday, 21 March, the stock raced ahead by almost 9% in just 5 days. Bain Capital has sealed the deal and will be acquiring an 18% stake in the company at a price of ₹236 per share. Effectively, the deal has been finalised at a 30% premium over the 6-month average trading price. The private equity firm has shelled out ₹4,385 crore for this acquisition.

Hold your horses. That’s just the first leg of the transaction.

After acquiring an 18% stake, regulations dictate that a mandatory open offer will be triggered for an additional 26% stake. Meanwhile, the existing promoters will hold a 28.9% stake in the company once the transactions are concluded.

But what's prompting this stake sale in the first place?

Apart from the financial boost, this investment is expected to aid in management succession planning as long-serving CEO V.P. Nandakumar transitions to a non-executive chairman role. Bain Capital, through this deal, will gain the right to nominate individuals to key leadership roles, including the CEO position—marking a shift toward more professionalised governance.

Regulatory and Management Considerations

Behind the scenes, the Reserve Bank of India (RBI) raised red flags about succession planning, especially concerning the proposed appointment of Nandakumar’s daughter—who has a medical background—as a board member. To address these concerns and align with governance norms, the promoter family initiated this stake sale. The move signals a broader intent: to ensure business continuity, bring in professional management, and comply with regulatory expectations.

Are Manappuram's dark days behind it?

Tough times don't last. Tough people companies do. 

After being slapped by loan disbursal curbs, Asirwad Finance got its act together. The company revamped its processes and assured the RBI that it would comply with regulatory norms and ensure fairness in loan pricing. 

But regulatory crackdown is not the only problem staring down at Manappuram. 

The microfinance industry has been experiencing a rough patch in the past couple of months. Weak borrower discipline, unpredictable rains, higher discretionary consumption by borrowers and a breakdown of the joint liability group (JLG) model are all contributing to the build-up of stress in the sector. 

Banks and NBFCs alike have seen their NPAs rise as the crisis in the MFI industry peaks. Naturally, Asirwad was no exception. The company took a write-off of a business expense indicating unreceived income or losses of ₹400 crore in the last quarter. Asirwad Microfinance also recorded a loss of ₹188 crore for the quarter. Quite expected, the GNPAs for Asirwad have bumped up from a tolerable 2.8% to a whopping 5.8%, whereas the NNPAs have climbed from 1.3% to 2.5%.

The negative impact of Asirwad’s blunders in the MFI space falls on Manappuram, its parent company. 

In Q3FY25, Manappuram’s net profit was wiped out by 52%, toppling from ₹575 crore in the corresponding quarter in FY24 to ₹279 crore. Naturally, provisions (funds put aside today so that the bank can absorb a future loss) also witnessed an exponential rise on a Y-o-Y basis, jumping 270% to ₹555 crore compared to ₹150 crore.

However, it isn't all doom and gloom for Manappuram. The company has been on a course correction:

• Reduced loan size in MFI.
• Tightened underwriting.
• Put a cap on the maximum number of lenders per borrower.

The company expects to overcome the MFI crisis in the next 2-3 quarters and improve collection efficiency to 99% due to all the remedial measures taken. 

Additionally, Manappuram is shifting its focus back to its strong points, namely, gold loan growth. The management is confident that starting Q4FY25, the company will be able to grow the gold loan business by 15-20%. Manapurram’s management has also decided to cut down on unsecured lending and steadily increase the share of secured lending.

There is good news on the vehicle and home loan front as well. Vehicle finance AUM has recorded a blistering growth of 41.4% Y-o-Y and 4.9% Q-o-Q, whereas the home loan portfolio has expanded by 25.7% Y-o-Y and 5.1% Q-o-Q. These figures bode well for Manappuram’s overall AUM growth.

Are retail investors in for a joyride?

First, any substantial stake acquisition is almost always great news for a company. It certifies that there is a lot more value to be extracted from the company. However, it may also introduce new dynamics or pressures that could impact the company’s direction.

What's all the more important is that the acquisition is being spearheaded by a private equity firm with a stellar reputation and long history as that of Bain Capital. Currently its investments in India stand at a whopping $7 billion, and the firm is aiming at a lofty target of investments worth $10 billion in the next 3-5 years. The private equity firm has its hand in a lot of Indian pies. 

• Tech ✅
• Pharma ✅
• Financial services ✅

Last year, it exited its investments in Axis Bank and L&T Finance and acquired a majority share in Adani Capital. It also has a stake in Emcure Pharma and wealth firm 360 ONE WAM.

Already, the Manappuram deal is shaping up to be a win-win for all the parties involved: Bain Capital will cash in on India’s demographic dividend and be a major player in the wealth creation journey for millions of Indians looking for access to quick credit, sans all the procedural banking frictions.

The private equity firm will also have the right to nominate individuals to key posts, such as CEO.  

However, acquisitions like these can have both positive and negative impacts on shareholders, making it important to approach with caution. Investors should focus on the company’s fundamentals and avoid making decisions based solely on news-driven short-term movements.

The Bottom Line

Granted, Manappuram has been through its fair share of problems. But, do bear in mind that the crisis brewing in the MFI sector isn’t solely afflicting Asirwad alone.

Its brunt has also been felt by several other SFBs and scheduled banks, which include the likes of Spandana Sphoorty, Credit Access Grameen, Fusion Microfinance, IDFC First Bank, Equitas SFB, etc.

However, Asirwad and Manappuram have unveiled a comprehensive course correction program that will ensure that the growth of the gold loan and secured portfolio is prioritised over the unsecured portfolio.

On top of it, sky-high gold prices also provide a cushion to Manappuram that is not available to banks with a small market share in the gold loan segment. With Bain Capital’s acquisition finalised, would you be keen on taking exposure to Manappuram?

*Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider but a guest blog and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.