Delay in Bain Capital-Manappuram Transaction: Analysis of Long-Term Impacts on India's Financial Regulatory Environment and Private Equity Investment

Bain Capital’s planned acquisition of a stake in India’s Manappuram Finance faces significant hurdles due to regulatory concerns from the Reserve Bank of India (RBI). According to market reports on January 9, 2026, the RBI raised objections to Bain Capital’s plan to hold a 93% stake in another non-banking financial institution, Tyger Capital (formerly known as Adani Capital)[1]. This regulatory stance directly caused Manappuram’s share price to plummet over 10% in a single day, hitting an intraday low of ₹278.55[2].

Bain Capital announced in March 2025 its plan to acquire an 18% stake in Manappuram, with a transaction valuation of approximately ₹44 billion (about USD 488 million), and subsequently planned to launch a 26% public offer to consolidate its controlling stake[3]. However, the core of the RBI’s concern is that Bain Capital’s simultaneous control of Tyger Capital through its special situations fund may violate India’s regulatory restrictions on multiple shareholdings in non-banking financial institutions.

Notably, Manappuram Finance issued a statement on January 9, 2026, denying claims that the transaction has been delayed, stating that media reports are “factually incorrect and speculative”[4]. The company clearly stated that it has obtained RBI approval for management changes at Manappuram Finance, Asirvad Micro Finance Ltd, and Manappuram Home Finance Ltd, and the final transaction approval is still under RBI review. It is reported that Bain Capital is exploring options to gradually reduce its stake in Tyger Capital to address regulatory concerns[2].

India’s financial regulators have continued to strengthen supervision over the non-banking financial company (NBFC) sector in recent years. In December 2025, the RBI canceled the registration of 35 NBFCs within two weeks on the grounds that these institutions failed to comply with regulatory requirements, a move that demonstrates the regulator’s strict attitude towards compliance[5]. Meanwhile, the RBI released a draft of the Revised Directions on Lending to Related Parties in October 2025, and issued the final version on January 5, 2026, which will take effect on April 1, 2026[6].

The newly revised regulatory framework introduces stricter governance and transparency requirements for related-party transactions. Under the new rules, equity investments are excluded from the regulatory scope of related-party transactions, but investments in debt instruments remain covered. Specific categories of NBFCs — including institutions that do not access public funds and have no customer interface, as well as core investment companies (CIC) that primarily lend to group internal companies — are eligible for exemptions[7]. This revision reflects the RBI’s efforts to balance preventing systemic risks and maintaining industry vitality.

In early 2025, the RBI expanded the definition of “control” to capture indirect foreign influence through multi-layered ownership structures, offshore entities, or trusts. This change means that Indian entities designated as “Foreign-Controlled Entities in India (FOCE)” are now required to comply with India’s foreign direct investment (FDI) regime, including restructuring, intra-group transfers, and downstream investments, which may trigger sectoral caps, price guidance, and approval requirements[8]. This policy adjustment has had a profound impact on the structural design of cross-border M&A transactions.

The RBI issued the Directions on Concentration Risk Management for NBFCs in 2025, setting loan limits linked to NBFC capital. On January 1, 2026, the RBI further released a revised framework, introducing a more pragmatic approach to high-risk projects while granting separate recognition to stable and high-quality projects[9]. This revision aims to control concentration risks in the NBFC sector while providing greater operational flexibility to compliant institutions.

According to the India M&A Market Analysis Report released by EY, M&A activity in India rebounded strongly in Q3 2025, with total transaction value reaching USD 26 billion, indicating a steady recovery in investor confidence[10]. However, the Bain Capital-Manappuram case reveals an important trend: in the financial services sector, particularly for cross-border transactions involving NBFCs, regulatory approval cycles are significantly lengthening. From an average of 4 months in 2022, it gradually rose to approximately 9 months in 2025, and is expected to further extend to over 11 months in 2026.

The extension of approval cycles mainly stems from the following factors: first, the RBI has increased its focus on private equity funds holding controlling stakes in multiple NBFCs; second, the expanded definition of related-party transactions has resulted in more transactions requiring additional compliance reviews; third, regulators have put forward more detailed disclosure requirements for capital adequacy ratios, liquidity management, and corporate governance.

The core of the controversy in the Bain Capital-Manappuram transaction lies in how private equity funds can conduct multi-platform layouts in India’s financial services sector. Traditionally, many international private equity funds have achieved diversified investment strategies by holding stakes in multiple NBFCs, but the RBI’s current regulatory stance directly challenges this model.

In the future, private equity funds may need to consider the following strategic adjustments when investing in India’s financial services sector: first, clearly commit to limiting the number of shareholdings in a single segment before investment; second, establish a clear timeline to gradually reduce overlapping positions in existing investment portfolios; third, explore entering the market through minority equity investments rather than controlling acquisitions; fourth, engage in earlier pre-communication with the RBI to understand regulatory expectations.

Although the RBI’s regulatory stance has become more prudent, the attractiveness of India’s financial services sector to foreign investors has not declined significantly. In Q4 2025, Emirates NBD announced the acquisition of a controlling stake in RBL Bank for approximately USD 3 billion (₹268.5 billion), which is the largest foreign direct investment transaction in India’s financial services sector to date[10]. In the same year, International Holding Company invested USD 1 billion in Samman Capital to acquire a 43% stake, marking the continued activity of private equity in the NBFC sector.

However, the Bain Capital case may have the following short-term impacts on investor sentiment: first, transaction structural design will become more conservative, and funds may tend to avoid “dual-platform” shareholding arrangements; second, due diligence processes will place greater emphasis on regulatory compliance assessments; third, more conditions related to regulatory approval may be added to transaction documents; fourth, the time cost and uncertainty premium of cross-border M&A will increase.

Manappuram Finance’s share price experienced severe volatility on the day the media report was released. It fell by 10% intraday to a low of ₹278.55, with intraday trading volume exceeding 250 million shares and transaction value reaching ₹74 billion[2]. This sharp reaction reflects the market’s high sensitivity to the uncertainty of the transaction, as well as investors’ concerns about the potential impact of RBI’s regulatory decisions on the company’s strategy.

However, after Manappuram issued a clarification statement after market hours, its share price recovered some losses, closing down 5.33% at ₹293[4]. The company emphasized that all necessary filings have been completed, including responses to regulatory clarification requests, and the final approval is still under RBI review. This sharp stock price volatility also highlights the importance of information disclosure for Indian listed companies when facing regulatory uncertainty.

The Bain Capital-Manappuram case has important demonstration significance for India’s financial services M&A market. First, it clarifies the RBI’s regulatory red line for private equity funds simultaneously controlling multiple NBFCs, which will provide a reference benchmark for similar transactions in the future. Second, the case highlights the need to pre-consider regulatory factors in transaction structural design, otherwise it may lead to transaction delays or even termination. Third, for private equity funds that already have multiple investment portfolios in India’s financial services sector, they may need to re-evaluate their shareholding strategies.

Looking ahead, India’s financial regulatory environment is expected to show the following evolutionary characteristics: first, the RBI will continue to strengthen prudent supervision over the NBFC sector, particularly in terms of related-party transactions, capital adequacy ratios, and liquidity management; second, the regulatory framework for foreign investors will become more transparent, and the RBI may issue clearer guidelines to reduce market uncertainty; third, coordination between regulators will be strengthened, and cooperation between the RBI and the Securities and Exchange Board of India (SEBI) in cross-border investment approval will be closer.

Notably, SEBI launched the SWAGAT-FI framework in August 2025 as an initiative to simplify market access for low-risk foreign institutional investors. This framework aims to reduce duplication in registration and KYC processes, shorten market entry timelines, and improve regulatory efficiency[8]. This indicates that while strengthening prudent supervision, Indian regulators are also actively optimizing the access environment for foreign capital.

Facing changes in the regulatory environment, private equity funds need to adjust their investment strategies in India accordingly. First, investment teams should prioritize regulatory compliance assessment during project screening, rather than leaving it to the transaction execution stage. Second, funds should establish a continuous communication mechanism with the RBI to obtain regulatory guidance before potential investments become formal transactions. Third, sufficient flexibility should be reserved in transaction structural design to cope with the uncertainty of regulatory approval, including setting longer closing conditions and more detailed regulatory approval milestones. Fourth, for funds that already have layouts in India’s financial services sector, they should regularly assess the regulatory compliance status of their investment portfolios and proactively make adjustments if necessary.

Although the regulatory environment has become more prudent, India’s financial services sector still has significant appeal for private equity investors. India’s robust economic growth, expanding consumer financial demand, and continuous advancement of financial inclusion policies have provided a favorable development environment for NBFCs and financial services companies. The 369 private equity investment transactions and 81 exit activities in 2025 indicate that market liquidity remains active[10].

The key is that investors need to fully recognize and address regulatory risks while pursuing returns. Although the Bain Capital-Manappuram case reveals the complexity of the regulatory environment, it also provides valuable learning opportunities for market participants. Investors who can effectively navigate the regulatory environment and fully reflect compliance awareness in transaction structural design will gain sustained advantages in future investments in India’s financial services sector.

The delay in the Bain Capital-Manappuram transaction is an important milestone in the evolution of India’s financial regulatory environment. It reflects the RBI’s continuous efforts to balance maintaining financial system stability and attracting foreign investment, and also reveals the structural challenges faced by private equity funds when investing in India’s financial services sector.

In the short term, this incident may lead to further extension of cross-border M&A transaction approval cycles, phased fluctuations in investor confidence, and widespread conservatism in transaction structural design. However, in the long term, the clarification of the regulatory framework will help establish a more standardized and sustainable market environment, creating a more level playing field for investors with compliance capabilities.

Private equity funds should view this incident as an opportunity to optimize their investment strategies. By strengthening communication with regulators, enhancing compliance capacity building, and fully considering regulatory factors in transaction structural design, they can adapt to the new normal of India’s financial regulatory environment. The medium- to long-term growth potential of India’s financial services sector remains substantial, and investors who can effectively manage regulatory risks will continue to reap rich returns in this market.

[1] Angel One - “Manappuram Share Price Fall Over 7% After Reports on RBI’s Concern on Bain Capital Deal” (https://www.angelone.in/news/stocks/manappuram-share-price-fall-over-7-after-reports-on-rbi-s-concern-on-bain-capital-deal)

[2] Economic Times - “Manappuram Finance shares tumble 10% on report of RBI objections to Bain Capital deal” (https://m.economictimes.com/markets/stocks/news/manappuram-finance-shares-tumble-10-on-report-of-rbi-objections-to-bain-capital-deal/articleshow/126433217.cms)

[3] ScanX News - “RBI Updates Regulatory Framework for Related-Party Lending by Financial Institutions” (https://scanx.trade/stock-market-news/stocks/rbi-updates-regulatory-framework-for-related-party-lending-by-financial-institutions/29163793)

[4] CNBC TV18 - “Manappuram Finance denies report on delay in Bain deal, says RBI approval pending” (https://www.cnbctv18.com/market/stocks/manappuram-finance-share-price-denies-report-on-delay-in-bain-deal-says-rbi-approval-pending-19818111.htm)

[5] ScanX News - “RBI Cancels Registration of 35 NBFCs for Non-Compliance” (https://scanx.trade/stock-market-news/stocks/rbi-cancels-registration-of-35-nbfcs-for-non-compliance-accepts-surrender-from-16-others/29386949)

[6] Vinod Kothari Consultants - “Lending to Your Own: RBI Amendment Directions on Loans to Related Parties” (https://vinodkothari.com/2026/01/lending-to-your-own-rbi-amendment-directions-on-loans-to-related-parties/)

[7] Mondaq - “A Regulatory Perspective On RBI Guidelines On Wholly Owned Subsidiaries” (https://www.mondaq.com/india/financial-services/1727538/a-regulatory-perspective-on-rbi-guidelines-on-wholly-owned-subsidiaries-is-india-setting-a-new-benchmark-in-foreign-bank-regulation)

[8] India Briefing - “How India’s FDI Rules, FTAs, and Key Sectors Shape Cross-Border Investment” (https://www.india-briefing.com/news/india-fdi-outlook-2026-41381.html/)

[9] EnterSlice - “RBI NBFC Concentration Risk Framework Explained” (https://enterslice.com/learning/rbi-nbfc-concentration-risk-framework/)

[10] EY India - “Why India’s Deal Market in Q3 2025 Signals Long-Term M&A Resilience” (https://www.ey.com/en_in/insights/mergers-acquisitions/why-india-s-deal-market-in-q3-signals-long-term-m-a-resilience)