Manappuram Finance Limited has reached a significant milestone in its corporate restructuring process, receiving approval from the Reserve Bank of India (RBI) for important management changes in its subsidiaries. This development is part of a larger transaction that could reshape the company's ownership structure.

RBI Approval for Subsidiary Management Changes

The RBI has given the green light for the appointment of Ms. Radhika Subramanian as an Additional Director (Non-Executive and Non-Independent) in two of Manappuram Finance's subsidiaries:

1. Manappuram Home Finance Limited
2. Asirvad Micro Finance Limited

Ms. Subramanian's nomination comes from BC Asia Investments XXV Limited and BC Asia Investments XIV Limited, signaling a strategic move in the company's governance.

Background of the Transaction

This approval is linked to a securities subscription agreement executed in March, which involves:

• Issuance of 9.29 crore equity shares to BC Asia Investments XXV Limited at INR 236.00 per share, totaling INR 2,192.47 crores.
• Issuance of 9.29 crore warrants to BC Asia Investments XIV Limited at the same price.

Implications of the Deal

Upon completion of these transactions:

1. The investors (BC Asia Investments XXV Limited and BC Asia Investments XIV Limited) will acquire control over Manappuram Finance.
2. They will be classified as promoters alongside existing promoters V.P. Nandakumar and Sushama Nandakumar.
3. A mandatory open offer to public shareholders will be undertaken in compliance with takeover regulations.

Additional Details from LODR Filing

The LODR filing provides further context to this development:

• The transaction is part of a larger 'Underlying Transaction' that includes a Preferential Issue and changes in company management.
• A Shareholders' Agreement (SHA) was executed on March 20, outlining the terms for company management and inter se rights between investors and promoters.
• The mandatory open offer is being undertaken by Investor 1 (BC Asia Investments XXV Limited) along with Investor 2 (BC Asia Investments XIV Limited) and other identified persons acting in concert.
• The consummation of the Underlying Transaction and completion of the Open Offer are subject to additional RBI approvals, including: a) Approval for undertaking the Open Offer and Underlying Transaction b) Approval for appointing individuals identified by the Investors as directors on Manappuram Finance's board

Market Impact

This RBI approval marks a crucial step in Manappuram Finance's corporate evolution. The entry of new investors and potential change in control could bring fresh perspectives and strategies to the company's operations in the financial services sector.

Investors and market watchers will be keenly observing the next steps in this transaction, particularly the completion of the open offer and the final RBI approvals for the overall change in control.

As the situation develops, stakeholders should stay tuned for further announcements from Manappuram Finance regarding the progress of this significant corporate action.

Manappuram Finance , a prominent non-banking financial company (NBFC), reported a significant deterioration in asset quality within its vehicle finance segment for the June quarter. The company's financial performance showed mixed results across various business segments.

Asset Quality Concerns

The Gross Non-Performing Assets (NPAs) in the vehicle finance segment rose sharply to 9.20% from 6.70% in the March quarter, indicating increased stress in this portfolio. This surge in NPAs raises concerns about the company's risk management practices in the vehicle finance sector.

Mixed Performance in Assets Under Management

Contrary to expectations of a 2.00% growth, Manappuram Finance's overall Assets Under Management (AUM) declined by 1.40% year-on-year. However, the company's gold loan segment showed resilience, with AUM increasing by 22.00%. This growth in gold loans suggests a shift in the company's focus towards its traditionally strong business line.

Financial Performance

The company's financial metrics for the quarter painted a challenging picture:

• Net Interest Income (NII) declined by 10.00% year-on-year and 4.40% sequentially
• Profitability saw a substantial drop, plummeting 75.00% from the previous year

Strategic Outlook

Despite the current challenges, Manappuram Finance's management has outlined several strategic initiatives:

1. Gold Loan Focus: The company expects gold loans to comprise 75.00% of its portfolio, up from the current 65.00%, indicating a strategic shift towards its core strength.

2. Yield Moderation: Management anticipates gold loan yields to moderate to 18.00% from the current 20.70% over the next four to six quarters.

3. Bain Capital Deal: The company is awaiting approval from the Reserve Bank of India (RBI) for its deal with Bain Capital, expected next month.

4. MFI Credit Costs: Manappuram Finance expects Microfinance Institution (MFI) credit costs to decline by up to 40 basis points, potentially improving profitability in this segment.

Market Response

The market reacted negatively to the news, with Manappuram Finance's shares closing 1.40% lower at ₹257.35. However, it's worth noting that the stock has gained 35.00% year-to-date, suggesting overall positive investor sentiment despite the recent setback.

The company's focus on expanding its gold loan portfolio while addressing challenges in other segments indicates a strategic realignment. Investors and analysts will likely keep a close eye on how these initiatives impact Manappuram Finance's performance in the coming quarters, particularly in terms of asset quality and profitability.