Bain Capital’s acquisition of a controlling stake in MGFL marks a breakthrough, with a shift towards professional governance, thus potentially catalyzing a valuation uplift. Amongst a plethora of challenges – prior regulatory scrutiny etc. – the deal timing is notable. So, we raise the multiple to 1.3x FY27E P/ABV (from 1x) and upgrade MGFL to Accumulate from Reduce, with TP also raised to INR 250 (from INR 185). While execution is key & kitchen sinking a possibility, we refrain from tweaking our estimates. Factoring in existing prospects, we maintain FY26E-27E RoE at 17.5-17.9%, RoA at 4.2% & 15% loan CAGR.
The announcement of Bain Capital acquiring a controlling stake in Manappuram Finance (MGFL IN) earmarks a turning point for the second- biggest market leader in the gold financing space. While the long-standing overhang is behind, Bain’s investment could catalyze a valuation re-rating for MGFL (acquisition at a premium), inviting investor confidence in MGFL’s growth and governance prospects. However, the wide valuation gap as against the market leader – MUTH at 2.4x FY27E P/ABF versus MGFL’s 1.1x – may not narrow down much until MGFL corrects its structural deficiencies & meet competitive challenges. While the transaction is expected to unfurl fully by Q2-Q3FY26, we reckon kitchen-sinking for another two quarters before MGFL wends its way towards strength. For now, this development and thus, the move towards professional management and the recent price uptick (20% in the past three months) prompt us to raise our multiple to 1.3x FY27E P/ABV (from 1x) – So, we upgrade MGFL to Accumulate from Reduce.