Bain Capital's Control Boosts Manappuram Finance Stock

Manappuram Finance shares surged, nearing a 52-week high on Wednesday. This gain follows Bain Capital's successful acquisition of control, a development that has bolstered investor confidence and shaped expectations for the company's future.

Bain Capital Completes Control Acquisition

Manappuram Finance shares climbed 7% on Wednesday to ₹302.40 intraday, extending a two-day surge of 12%. The stock is now close to its 52-week high of ₹320.95. This rally occurred after Bain Capital's open offer concluded on April 20, 2026, with no public shareholder participation. However, a preferential issue on March 27, 2026, transferred control to Bain Capital entities. As of April 21, 2026, Bain Capital is the promoter, expected to hold 18.0% to 41.66% of shares fully diluted. Existing promoters will retain 28.9%. The market's positive response indicates growing confidence under new major ownership.

Growth Outlook and Peer Valuation

Axis Securities expects Manappuram Finance to accelerate gold loan growth, driven by higher loan amounts and customer additions. The non-gold portfolio is projected to stabilize before resuming growth from FY27. Pressure on Net Interest Margins (NIMs) is expected to ease as gold yield rationalization concludes. However, operating expenses will remain elevated due to investments in technology, branches, and staff. Axis Securities anticipates operating leverage and cost efficiencies to materialize over the medium term.

Manappuram Finance trades at a P/E of 14.56, lower than IIFL Finance's 29.68 but higher than Muthoot Finance's approximately 16.75. The Indian gold loan NBFC sector is growing rapidly, with Assets Under Management (AUM) forecast to reach ₹4.0 lakh crore by March 2027. This growth is supported by high gold prices and a move towards secured lending. New LTV regulations, effective April 1, 2026, are expected to boost lending capacity. Sector AUM growth is projected at 30-35% for FY26.

Risks and Challenges Ahead

However, potential risks exist. Axis Securities has already reached its target price of ₹295, indicating current valuations may fully reflect expected near-term gains. Elevated operating expenses from continued investments in infrastructure and technology could temper profitability, even with projected operating leverage. Manappuram Finance's Q3FY26 results revealed a decline in net interest income and profit after tax, alongside rising operating expenses. While gold loans showed strength, non-gold segments like Vehicle Finance and Housing Loans experienced sharp declines last quarter, highlighting portfolio concentration risks. The market's reaction to the 'NIL' tenders in the open offer, juxtaposed with the control transfer via a preferential issue, warrants scrutiny regarding shareholder alignment and the perceived deal structure.

Future Projections

Axis Securities has raised its FY26 AUM growth projections based on strong gold loan momentum. While FY26 Net Interest Income (NII) estimates are slightly reduced (by about 3%) due to yield moderation, projections for FY27-28 are increased by 2-3%. This is due to expected sustained gold loan growth and a recovery in non-gold segments. The brokerage forecasts Return on Assets (RoA) and Return on Equity (RoE) to stabilize at 2.6-2.8% and 11-13%, respectively, between FY27-28E, up from 1.3% and 5.4% in FY26. Overall, AUM, NII, and earnings are projected to grow at a Compound Annual Growth Rate (CAGR) of 19%, 22%, and 81%, respectively, from FY25 to FY28E.