Manappuram Finance share price jumps 5%; what’s driving the stock? What should investors do?

Manappuram Finance's share price jumped over 5 per cent in the morning trade on the BSE on Friday, March 21, a day after the company said Bain Capital would invest ₹4,385 crore to acquire an 18 per cent stake and take joint control of the company following an open offer.

Manappuram Finance share price opened at ₹226.50 against its previous close of ₹217.50 and jumped over 5 per cent to the level of ₹228.60, slightly below its 52-week high level of ₹230.25, hit on July 19 last year. The shares of non-banking financial company (NBFC), however, pared gains and traded 2.23 per cent higher at ₹222.35 around 9:45 AM.

"An open offer is being made for an acquisition of up to 24,42,27,387 fully paid-up equity shares of face value of ₹2 each, representing 26 per cent of the expanded voting share capital of target company (Manappuram Finance) from its public shareholders at a price of ₹236 per share by BC Asia Investments XXV Limited, together 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.," said the company in an exchange filing on March 20.

Manappuram Finance share price trend

The NBFC stock has been on a winning streak for the last 12 sessions, including today. At the current market price of ₹228.60, the stock has jumped 21 per cent this year so far defying weak market sentiment.

Manappuram Finance's share price hit a 52-week low of ₹138.40 on October 23. It has jumped 65 per cent from its one-year low level.

Manappuram Finance: What should investors do with the stock?

Some brokerage firms have upgraded the stock after Bain Capital said it would acquire a controlling stake in the company. However, they highlight the company's need to correct its structural deficiencies and meet competitive challenges.

Brokerage firm Elara Capital has upgraded the stock to an "accumulate from a "reduce", with a target price of ₹250. This implies an upside potential of 15 per cent from the stock's previous session close of ₹217.50.

Elara said the announcement of Bain Capital acquiring a controlling stake in Manappuram Finance marks a turning point for the second-biggest market leader in gold financing.

"While the long-standing overhang is behind, Bain’s investment could catalyse a valuation re-rating for Manappuram Finance, inviting investor confidence in the company’s growth and governance prospects," said Elara.

However, Elara observed that the "wide valuation gap as against the market leader—Muthoot Finance at 2.4 times FY27E P/ABF versus Manappuram Finance’s 1.1 time—may not narrow down much until Manappuram Finance corrects its structural deficiencies and meets competitive challenges."

"While the transaction is expected to unfurl fully by Q2-Q3FY26, we reckon kitchen-sinking for another two quarters before Manappuram Finance wends its way towards strength. For now, this development and, thus, the move towards professional management and the recent price uptick prompt us to raise our multiple to 1.3 times FY27E P/ABV," Elara said.

The stock has seen significant gains in the last few months, which seem to have made some experts cautious about it at the current juncture.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that Manappuram Finance has surged nearly 30 per cent in the past two months, approaching a key resistance zone near the R1 yearly pivot, aligning with the previous high from June 15, 2024.

"This area, around ₹220- ₹225, is critical for potential profit-booking as it may face selling pressure. A correction from this level could provide a better re-entry opportunity," said Patel.

"We recommend booking profits near the resistance zone and waiting for a healthy pullback to reassess fresh positions for optimal risk-reward," said Patel.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.