The Pune-based Poonawalla Group has announced that it will subscribe to a 3,456-crore preferential issue to acquire a controlling 60% stake in Magma Fincorp.
Magma Fincorp Ltd shares rose 10% in early trading on Thursday, reaching their highest level in 19 months, a day after the Poonawalla Group said it would buy a stake in the non-banking finance business. On Thursday, Magma Fincorp’s stock rose 9.94 percent to 93.40 on the BSE and 9.99 percent to 93.55 on the NSE.
The Pune-based Poonawalla Group announced on Wednesday that it would subscribe to a 3,456-crore preferential issue to acquire a controlling 60% stake in Magma Fincorp. Poonawalla Finance, the NBFC arm of the Poonawalla Group, which is best known for Serum Institute of India, lends primarily to professionals.
Rising Sun’s director, Adar Poonawalla, believes the country’s financial services sector has limitless potential, which the proposed deal will only help to expand. The significant equity injection, according to Sanjay Chamria, vice chairperson and managing director of Magma, would assist in propelling Magma into a higher growth trajectory, benefiting from the possible lower cost of funds, stronger credit scores, and ultimately improving the overall return on investment.
What you need to talk about the contract is as follows:
- The purchase will be made through Rising Sun Holdings, a group corporation. Rising Sun will take a 60% interest in the company and make an open bid under the Securities and Exchange Board of India’s guidelines (Sebo). The deal is contingent on shareholder and regulatory approvals.
2. As part of the deal, Magma Fincorp plans to give Rising Sun 45.80 crore shares, or 60% of the company, and Chamria and Mayank Poddar 3.57 crore shares.
3. The preferential allotment represents 64.68 percent of Magma’s enhanced equity share capital post-issue and based on current shareholding, Rising Sun will own 60% of the company, while the existing promoter party will own 13.3 percent.
4. Magma Fincorp’s net worth will increase to over 6,300 crores as a result of the equity infusion. After the preferential matter, Rising Sun Holdings will become the promoters of Magma Fincorp and its subsidiaries, which will all be called Poonawalla Finance.
5. Adar Poonawalla will become the board’s chairperson, and Abhay Bhutada, the current managing director and chief executive of Poonawalla Finance, will become the merged entity’s managing director after the merger.
6. Chamria will remain as executive vice-chairman of the combined company, which will be expanded by the addition of a new CEO and a chief operating officer.
7. Magma will be able to invest further in its housing finance subsidiary and general insurance joint venture thanks to this equity capital infusion.
8. Magma Fincorp started as a non-deposit taking NBFC nearly three decades ago, offering a variety of products including industrial finance, agricultural finance, SME finance, mortgage finance, and general insurance, in addition to affordable housing.
9. Magma has 298 branches in 21 states, serving over five million customers and managing a loan book of Rs 15,000 crores.