What is Causing the 5% Increase in the Price of Manappuram Finance’s Stock?

Following Bain Capital’s announcement of a ₹4,385 crore investment for an 18% stake, Manappuram Finance’s share price increased by more than 5% in morning trading on March 21. The stock rose from ₹226.50 to ₹228.60.

Manappuram Finance Share Price:

A day after the company announced that Bain Capital would spend ₹4,385 crores to purchase a 26% interest and take joint control of the business, Manappuram Finance’s share price surged by more than 5% in morning trading on the BSE on Friday, March 21. In contrast to its previous finish of ₹217.50, the share price of Manappuram Finance began at ₹226.50 and surged more than 5% to ₹228.60, which is just below its 52-week high of ₹230.25, which was reached on July 19 of last year. However, at around 9:45 AM, the shares of the non-banking financial corporation (NBFC) trimmed gains and were 2.23 percent higher at ₹222.35.

Bain Capital, a private investment group located in the United States, would invest ₹5,764 crore to purchase a 26% interest and assume joint control of Manappuram Finance, a non-bank lender based in Kerala and the nation’s second-largest gold financier.

In an exchange filing on March 21, the company stated that it is making an open offer to purchase up to 24,42,27,387 fully paid-up equity shares of value of ₹ 2 each from its public shareholders at a price of ₹236 per share. This represents 26% of the expanded voting share capital of the target company (Manappuram Finance) and is being made by BC Asia Investments XXV Limited, along with BC Asia Investments XIV Limited, BC Asia Investments XXIV Limited, BC Asia Investments XXVI Limited, BC Asia Investments XXI Limited, Bain Capital Asia Fund V, L.P., BC Asia V CTB Investors, L.P., and BC Asia V Private Investors, L.P.

For the past 12 sessions, including today, the NBFC stock has been rising. Despite the dismal market sentiment, the stock has increased 21% this year to its current market price of $228.60. On October 23, the share price of Manappuram Finance fell to ₹138.40, its lowest level in 52 weeks. From its one-year low, it has increased by 65%.

Following Bain Capital’s acquisition of a majority share in the business, certain brokerage houses upgraded the stock. However, they draw attention to the company’s need to address its structural shortcomings and contend with the competition.

With a target price of ₹250, brokerage company Elara Capital has upgraded the stock from a “reduce” to a “accumulate.” This suggests that the stock might rise by 15% from its closing price of ₹217.50 the previous day.

According to Elara, the news that Bain Capital would purchase a majority share in Manappuram Finance is a watershed for the second-largest market leader in gold finance. According to Elara, Bain’s investment may spur a re-rating of Manappuram Finance’s value, attracting investor confidence in its development and governance prospects, even if the long-standing overhang is behind it.

However, Elara said that until Manappuram Finance fixes its structural flaws and overcomes competitive obstacles, the significant valuation difference with the market leader—Muthoot Finance at 2.4 times FY27E P/ABF against Manappuram Finance’s 1.1 time—may not significantly close.

Although it is anticipated that Q2 will complete the deal–Q3 of FY26, we predict that it will take another two quarters until Manappuram Finance turns things around. According to Elara, we are raising our multiple to 1.3 times FY27E P/ABV due to this progress, the shift to professional management, and the recent price increase. Over the past few months, significant advances in the stock have caused some analysts to be wary of it.

Manappuram Finance has risen by about 30% in the last two months, nearing a crucial resistance zone close to the R1 annual pivot, which corresponds with the previous high from June 15, 2024, according to Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share & Stock Brokers.

Since it can see purchasing pressure, this region is between ₹220-₹225, which is crucial for possible profit booking. “A correction from this level could offer a better re-entry opportunity,” Patel stated. Patel added that we advise booking gains close to the resistance zone for the best risk reward and holding off on reevaluating new positions until a robust downturn occurs.