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Adar Poonawalla to buy Magma Fincorp. Here’s all about the deal
The Pune-based Poonawalla Group has said it is acquiring a controlling 60 per cent stake in Magma Fincorp by subscribing to a ₹3,456-crore preferential issue.
Shares of Magma Fincorp Ltd jumped 10 per cent in early trade, the highest in 19 months, on Thursday a day after the Poonawalla Group said it will buy a stake in the non-banking finance firm. Magma Fincorp’s stock jumped 9.94% to ₹93.40 on BSE and on NSE, it gained 9.99% to ₹93.55 on Thursday.
The Pune-based Poonawalla Group said on Wednesday it is acquiring a controlling 60 per cent stake in Magma Fincorp by subscribing to a ₹3,456-crore preferential issue. The Poonawalla Group, better known for Serum Institute of India, has a fledgeling NBFC arm called Poonawalla Finance, which lends mostly to professionals.
Adar Poonawalla, the director of Rising Sun, has said he sees unlimited potential in the financial services space in the country and the proposed deal only helping widen the same. Sanjay Chamria, the vice chairperson and managing director of Magma said the substantial equity infusion will help in propelling Magma into a higher growth trajectory, benefiting from the potential lower cost of funds, improved credit ratings and eventually improve the overall return on investment.
Here is what you need to know about the deal:
1. The acquisition will be done through a group company called Rising Sun Holdings. The transaction will result in Rising Sun taking over the company with a 60% stake and an open offer under applicable guidelines of the Securities and Exchange Board of India (Sebo). The transaction is subject to shareholders and regulatory nods.
2. Magma Fincorp proposes to allot 45.80 crore or 60% shares to Rising Sun and 3.57 crore shares to Chamria and Mayank Poddar as part of the transaction.
3. The preferential allotment represents 64.68% of Magma's enhanced equity share capital post-issue and based on the current shareholding, Rising Sun will hold 60% stake and the existing promoter group's stake will come down to 13.3%.
4.The equity infusion will result in the net worth of Magma Fincorp rising to over ₹6,300 crore.
5. Rising Sun Holdings will become the promoters of Magma Fincorp and its subsidiaries, which all will be renamed as Poonawalla Finance, after the preferential issue.
6. Adar Poonawalla will become the chairperson of the board and Abhay Bhutada, presently the managing director and chief executive of Poonawalla Finance, will be the managing director of the merged entity after the deal.
7. Chamria will continue as the executive vice-chairman of the merged entity, which will be strengthened through with a new chief executive offer and also a chief operating officer.
8. This equity capital infusion will enable Magma to further invest in its housing finance subsidiary and general insurance joint venture.
9. Magma Fincorp began operations nearly three decades ago as a non-deposit taking NBFC offering a bouquet of products including commercial finance, agri finance, SME finance, mortgage finance and general insurance apart form affordable housing.
10. Magma is present across 21 states with 298 branches serving more than five million customers and manages a loan book of ₹15,000 crore.
(With agency inputs)
