ICICI Venture and Morgan Stanley Private Equity Asia are leading a new round of fund infusion into Magma HDI General Insurance along with the Cyza Chem (a Poonawalla Group Company). The transaction of Rs 525 crore includes a primary capital raise of Rs 250 crore.
Post the deal, Magma Fincorp will hold 24.2 percent stake (from 29.3 percent at present) in the general insurer. Germany's HDI will hold 17.1 percent, ICICI Venture will hold 16.7 percent stake, Jaguar Advisory will hold 12 percent, Morgan Stanley Private Equity at 9.99 percent, Serum Institute at 8.2 percent, Cyza Chem at 5.9 percent and others (family offices, employees) at 5.9 percent.
The insurer in a statement said that the fresh capital infusion of Rs 250 crore will provide growth capital to meet the needs of the expanding distribution capabilities of the company.
The secondary sale of Rs 275 crore enables Magma Fincorp and its group companies in complying with the Reserve Bank of India’s guidelines for ownership of stake in insurance companies. RBI has capped maximum shareholding in insurance at 50 percent.
Once the deal is completed, ICICI Venture and Morgan Stanley will have the right to appoint nominee directors to the insurance company's board.
Rising Sun Holdings, a company controlled in personal capacity by Serum Institute of India CEO Adar Poonawalla had announced a transaction on February 10 to acquire a controlling stake in Magma Fincorp (MFL), a non-banking financial company (NBFC).
The transaction is subject to shareholder and regulatory approvals, including the Insurance Regulatory and Development Authority (IRDAI) and the Competition Commission of India (CCI).
Rajive Kumaraswami, Managing Director & Chief Executive Officer, Magma HDI General Insurances said, "The growth capital which the investors bring on board will enable us to expand the business and explore new opportunities. The insurance sector is poised to see exponential growth given the low penetration and the trigger of the pandemic which has led people to look at insurance as protection."
For the nine-months ended December 31, 2020 (9MFY21) Magma HDI General Insurance had a net profit of Rs 22.3 crore and a Gross Written Premium (GWP) of Rs 911.2 crore compared to Rs 7.3 Crore PAT and GWP of Rs 948.5 crore in the same period last year.
Magma Fincorp also informed the exchanges that the infusion of Rs 250 crores of equity into the insurance company will 'substantially enhance' the solvency ratio of the company from 1.8x as of December 2020. IRDAI rules state that insurers have to maintain 1.5x solvency at all times.
Ambit is the exclusive financial advisor and Wadia Ghandy is the legal advisor to the transaction.