Adar Poonawalla-backed firm to acquire majority stake in Magma Fincorp for Rs 3,456 crore

SII CEO Adar Poonawalla (File Image: Twitter)

Rising Sun Holdings, a company controlled in personal capacity by Serum Institute of India CEO Adar Poonawalla, announced a transaction on February 10 to acquire a controlling stake in Magma Fincorp (MFL), a non-banking financial company (NBFC).

The deal will be carried out via a preferential issue of Magma Fincorp's equity shares worth Rs 3,456 crore. The deal also includes an open offer as per SEBI norms.

According to an official statement, the deal “ is subject to shareholders’ and other regulatory approvals and represents 64.68 percent of MFL’s enhanced equity share capital post the issue. Based on current shareholding, Rising Sun Holding would hold 60 percent stake in the entity post issuance and the existing promoter group stake would get reduced to 13.3 percent post issuance. The net worth of MFL shall increase to over Rs 6,300 crore post the issuance.”

Following the preferential issue, Rising Sun Holdings would be classified as the promoter of MFL. MFL and its subsidiaries shall be renamed and rebranded under the brand name “Poonawalla Finance”, subject to regulatory approvals.

Subsequent to the completion of the preferential allotment, the existing financial services business of Poonawalla Finance is proposed to be consolidated into MFL subject to compliance with extant regulations.

“I am excited at this opportunity to infuse majority capital for controlling stake of MFL. I see an unlimited potential in India in the financial space as our economy is poised to grow in double digits and this ties in with our group philosophy of serving the needs and dreams of the nation, and financial service plays an important role in supporting and fuelling the growth of our country. This transaction is subject to statutory and regulatory approvals,” said Poonawalla, Director, Rising Sun Holdings.

Sanjay Chamria, Vice Chairman and Managing Director, MFL, said: “Considering the positives in the deal by way of huge capital infusion, strong brand value and ability to attract top notch talent, the Board of the Company has rightly decided to accept an offer for a substantial equity infusion into the company. This would help in propelling the company into a higher growth trajectory, benefiting from potential lower cost of funds, improved credit rating and with additional leveraging of the huge distribution network, will eventually improve the overall RoE. We are proud to be associating with one of the country’s finest and reputed business groups, and hope to together take the Company to new heights.”

According to the official announcement, both parties believe that the transaction would be in the best interests of all the stakeholders and that post transaction, MFL would be uniquely placed to leverage the vast opportunities in the lending space with expected reduction in borrowing cost.

Strong corporate backing and substantial fund infusion is likely to have a positive effect on the credit rating of the company as well. This infusion would also enable MFL to invest in its housing finance subsidiary and general insurance joint venture, the announcement said.

Economic Laws Practice is acting as the tax and transaction advisor, Khaitan & Co is acting as the legal advisor, and Axis Capital is acting as the merchant banker to the open offer to Rising Sun Holdings.

Deloitte Touche Tohmatsu India LLP is acting as the exclusive financial advisor to MFL, Wadia Ghandy & Co is acting as legal advisor, and Vinod Kothari & Co is acting Corporate law advisors to the company.