S&P Global expects Manappuram Finance to monetise its microfinance arm
This story was originally published at 08:50 IST on 25 March 2025
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MUMBAI – S&P Global Ratings expects Manappuram Finance to monetise its subsidiary Asirvad Micro Finance in the medium term and focus on secured lending. The non-banking finance company may gradually reduce its exposure to microfinance loans, given the ongoing stress in India's microfinance sector and heightened regulatory scrutiny, the rating agency said in a report.
As of Dec. 31, gold-backed loans accounted for about 55% of Manappuram Finance's assets under management, while microfinance loans made up around 21%, with the remaining mainly toward affordable housing, vehicle finance, and micro, small, and medium enterprises, according to the rating agency.
"Meanwhile, the transaction will provide Manappuram with growth capital to focus on its core product of gold-backed loans and on other secured loans," S&P Global Ratings said. "We continue to assess the company's capital and earnings as very strong, with the risk-adjusted capital ratio likely to exceed the Mar. 31, 2024, level of 30% after the transaction."
On Thursday, Manappuram Finance informed exchanges that its promoters would sell 18% stake in the company to Bain Capital through preferential allotment of shares and warrants for INR 43.85 billion. The sale would trigger a mandatory open offer for an additional 26% stake by Bain Capital. "The stake could go up to 41.7% on a fully diluted basis, depending on the outcome of a mandatory open offer," the report said.
The company has faced elevated reputational risk in recent times. The Reserve Bank of India had imposed curbs on its microfinance business in October 2024.
According to S&P Global Ratings, Bain Capital's investment in Manappuram Finance Ltd. is expected to improve the company's corporate governance. The US-based firm may influence Manappuram's strategy and appoint key personnel including the CEO. On Monday, shares of the company ended 2.7% higher at INR 240.38. End
Reported by Vaishali Tyagi
Edited by Avishek Dutta
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