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Informist, Friday, Mar. 21, 2025

 

--S&P: Don't see impact on Manappuram Fin rating from Bain Capital stake buy

--S&P: Manappuram Fin's capital "very strong" before Bain Capital stake buy

--S&P: Bain Capital stake buy good for Manappuram Fin's corporate governance

 

NEW DELHI – The infusion of additional capital into Manappuram Finance from Bain Capital's purchase of an 18% stake in the former is not expected to push up the shadow bank's rating, according to S&P Global Ratings, with the Kerala-based non-banking financial company already seen to have "very strong" capital levels prior to the transaction.

 

"So this transaction would provide growth capital of about INR 44 billion to the company. That said, we have already assessed Manappuram's capital assessment as very strong. So incremental raising of capital doesn't lead to any change in this assessment. So overall at this point in time we don't see any impact on the rating," Shinoy Varghese, an associate director at S&P Global Ratings, said Friday.

 

Thursday, Manappuram Finance informed exchanges that its promoters will sell an 18% stake in the company to Bain Capital through preferential allotment of shares and warrants for INR 43.85 billion. The sale would trigger the mandatory open offer for an additional 26% stake by Bain Capital. Shares of the lender are to be sold to Bain Capital at INR 236 per share, a premium of 30% over the six-month average trading price. On Thursday, shares of Manappuram Finance ended 1.7% higher at INR 217.50 on the National Stock Exchange. At 1330 IST, the shares were up 8.2% at INR 235.39.

 

S&P Global Ratings has a BB- long-term rating on Manappuram Finance, with a stable outlook.

 

However, Varghese said Bain Capital's stake purchase was a positive for Manappuram Finance from a corporate governance perspective considering one of its subsidiaries, Asirvad Micro Finance Ltd., had come under fire from the Reserve Bank of India in October for charging excessively high interest rates, among other issues, and was barred from giving fresh loans. While the restrictions were removed in early January, Verghese said such events increased reputational risk. "Now, we think that this transaction is overall good for corporate governance of the company," he added.

 

Speaking more broadly on the microfinance sector, Verghese said delinquency levels may rise further in 2025-26 (Apr-Mar) as the industry tightened guardrails and improved underwriting standards. Asset quality stress could further increase due to "socio-political issues", Verghese warned, seemingly referring to the law the Karnataka government introduced last month regulating the microfinance sector.

 

"As a result, we expect credit costs to stay elevated even in fiscal 2026 (FY26) compared to that in fiscal 2025. We expect asset under management for Indian microfinance entities to grow at a mid-to-high single digit through fiscal 2026 after over a 10% contraction that we have seen in the first nine months of fiscal 2025," the S&P analyst said.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Siddharth Upasani

Edited by Akul Nishant Akhoury

 

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