Bain’s Manappuram deal delayed by Indian regulatory concerns, sources say

MUMBAI: India’s central bank has raised objections to Bain Capital’s plan to acquire a controlling stake in Manappuram Finance as the U.S. firm has a controlling interest in another Indian lender, three people with direct knowledge of the matter said.

Shares in Manappuram slid on the news, extending losses to be last down 5%.

The Reserve Bank of India (RBI) frowns on investors having control of multiple lenders - whether they be banks or non-banks. Private equity firms that have held 20% or more in non-bank lenders have previously had to divest holdings in the face of RBI opposition.

Bain, which announced its planned investment in the gold loan firm last March, is exploring a phased divestment in Tyger Capital, a smaller firm, to address the RBI’s concerns, one of the people said.

The sources were not authorised to speak to media and declined to be identified.

Bain declined to comment. It received approval for the Manappuram deal, which was announced last March, from India’s market regulator and the competition commission but the RBI is the final authority for the clearance of any large stake purchases in banks and non-bank lenders.

Manappuram, which extends loans where gold is used as collateral, did not respond to a request for comment.

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The RBI also did not respond to a request for comment, while Tyger declined to comment.

The proposed deal calls for Bain to acquire 18% of Manappuram for around 44 billion rupees ($488 million) after which it would launch an open offer for an additional 26%. That would make Bain one of two controlling shareholders with the right to influence management decisions.

The investments would be made through two of its funds, BC Asia Investments XXV and BC Asia Investments XIV.

Bain owns 93% of non-bank lender Tyger Capital, formerly Adani Capital, after purchasing shares from the Adani family in 2023. That investment is held by the Bain Capital Special Situations fund.

Bain has argued that the investments are being made through different funds and teams but that argument is unlikely to sway the RBI, according to one of the sources.

Manappuram has a 315 billion rupee ($3.5 billion) loan book, focused on fast-growing gold loans. Tyger has a smaller asset base of 73.2 billion rupees that includes business, farm and home loans.

India’s financial sector saw a rush of foreign investments last year. Japan’s MUFG announced in December it would take a 20% stake in Shriram Finance for $4.4 billion. Blackstone agreed in October it would pay around $700 million for a 9.9% stake in India’s Federal Bank.