Exclusive-Bain's Manappuram deal delayed by Indian regulatory concerns, sources say

By Gopika Gopakumar

MUMBAI, Jan 10 (Reuters) - 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 close down 7.8%.

The Reserve Bank of India 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.

Asked for comment, Bain Capital Special Situations fund, which holds Bain's investment in Tyger ?Capital, said it has not announced and does not have any ?plans currently to sell a controlling stake.

The fund is "focused and fully committed to growing Tyger Capital to achieve its full potential in partnership with its management team, given the strong fundamentals and ?growth opportunities in the markets it serves," it said in ?a statement late ?on Friday.

Manappuram, which extends loans where gold is used as collateral, in a late Friday statement to stock exchanges said the Reuters story was "factually incorrect and speculative in nature", without elaborating. However, it said the ?company had responded to certain clarifications sought by the RBI.

"The necessary filings (including responses to clarifications sought from RBI) have been made ... approval of the RBI for the proposed transaction is pending," Manappuram said.

RBI did not respond to requests for comment. Tyger declined to comment.

Bain 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.

The proposed deal calls for Bain to acquire 18% of Manappuram for around 44 billion rupees ($490 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.

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 source.

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.

(Reporting by Gopika Gopakumar; Editing by Ira Dugal, Edwina Gibbs and William Mallard)