Poonawalla-backed firm to buy majority stake in Magma Fincorp for Rs 3,456 cr

Adar Poonawalla

Adar Poonawalla-controlled Rising Sun Holdings is acquiring a majority stake in non-banking financial company Magma Fincorp and will be infusing fresh capital into the company. This will be followed by an open offer.

Rising Sun Holdings and Magma Fincorp on Wednesday announced a transaction for preferential issue of equity shares of Magma Fincorp for Rs 3,456 crore.

The preferential allotment represents 64.68% of Magma’s enhanced equity share capital post the issue. Based on current shareholding, Rising Sun Holding would hold 60.0% stake in the entity post issuance and the existing promoter group stake would get reduced to 13.3% post issuance. The net worth of Magma Fincorp will increase to over Rs 6,300 crores post the issuance.

Following the preferential issue, Rising Sun Holdings will become the promoter of Magma Fincorp and Magma would be renamed and rebranded as Poonawalla Finance. The existing financial services business of Poonawalla Finance is to be consolidated into Magma Fincorp.

As part of the transaction, Magma Fincorp proposes to allot 45,80,00,000 shares to Rising Sun Holdings, and 3,57,14,286 shares to Sanjay Chamria and Mayank Poddar. Rising Sun Holdings would be nominating Adar Poonawalla as the chairman of the board of directors and Abhay Bhutada, presently MD & CEO of Poonawalla Finance, as MD. Chamria would continue as the executive vice chairman of the Board.

Speaking on infusion of majority capital for controlling stake of Magma Fincorp, Adar Poonawalla, director, Rising Sun Holdings, said he saw an unlimited potential in India in the financial space as the economy was poised to grow in double digits.

Chamria said, considering the positives in the deal by way of huge capital infusion, strong brand value and ability to attract talent, the board decided to accept an offer for a substantial equity infusion into the company. This would propel the company into a higher growth trajectory, benefiting from potential lower cost of funds and improved credit rating. This infusion would also enable Magma Fincorp to further invest in its housing finance subsidiary and general insurance JV. The BSE and NSE listed Magma has a loan book of `15,006 crore with a presence across 21 states and 298 branches with a customer base of 5 million.

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