Bain Capital's strategic investment to boost Manappuram Finance's corp governance S P

New Delhi, Mar 25 (PTI) S&P Global Ratings on Tuesday said Manappuram Finance Ltd's corporate governance will get a boost from Bain Capital's recent strategic investment.
     The US-based private investment firm could materially influence the India-based gold financier's strategy and appoint key personnel, including the CEO, it said.
     On March 20, Bain Capital said it would invest about Rs 4,390 crore to acquire an 18 per cent stake in Manappuram, subject to regulatory approval. The stake could go up to 41.7 per cent on a fully diluted basis, depending on the outcome of a mandatory open offer.
     The share of current promoter V P Nandakumar and his wife will dilute to 28.9 per cent from 35 per cent as of end-December 2024. Nandakumar will transition to a non-executive chairman and mentor role.
     "Manappuram Finance Ltd's corporate governance will get a boost from Bain Capital's recent strategic investment," S&P Global Ratings said in a statement.
     S&P said the transaction will provide Manappuram with growth capital to focus on its core product of gold-backed loans and other secured loans.
     It said Manappuram has faced elevated reputational risk in recent times. The Indian central bank had imposed curbs on its microfinance business in October 2024.
     "Given the ongoing stress in India's microfinance sector and heightened regulatory scrutiny, we believe the share of microfinance loans in Manappuram's assets under management (AUM) could gradually reduce. We also see a possibility that Manappuram could monetise its subsidiary Asirvad Micro Finance in the medium term and focus on secured lending, subject to market conditions," 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 mainly toward affordable housing, vehicle finance, and micro, small, and medium enterprises.
     Separately, Fitch Ratings said plans for Bain Capital to acquire a stake in Manappuram Finance could help to allay management succession uncertainty and strengthen governance at the India-based non-bank lender.
     "The new equity raised should support MFIN's capital buffer and growth prospects, but an intended refresh of the company's executive team could raise continuity risks if not smoothly managed. Any impact on the credit profile may take time to materialise," Fitch said.
     Fitch expects Bain's involvement will assist in transitioning MFIN from its greater reliance on its founder's strategy and leadership towards a more institutionalised management structure. This could form an important step in resolving key-person risks, which Fitch has identified as a constraint for MFIN's profile.
     Nonetheless, the effect of the transaction on MFIN's credit profile would depend on the expertise of the refreshed senior management team, along with its strategic approach and risk appetite. Management's ability to instil more robust practices and controls, while maintaining employee and customer goodwill, will be key to the transaction's success. Fitch expects such outcomes to only emerge over time.

(This story has not been edited by THE WEEK and is auto-generated from PTI)