Magma Fincorp shareholders approve 60% acquisition by Poonawalla-led firm

Non-banking finance company Magma Fincorp Ltd (Magma) on Tuesday said its shareholders have approved the company's plan to raise up to Rs 3,456 crore by issuing preference equity shares to Adar Poonawalla-controlled Rising Sun Holdings Ltd (RSHPL) and two members from the promoter group.

The members of the company approved with requisite majority the preferential issue of 49,37,14,286 equity shares to RSHPL, Sanjay Chamria and Mayank Poddar at the extraordinary general meeting (EGM) held on Tuesday (March 9), Magma said in a regulatory filing.

The company, whose promoter shareholding is slated to be changed to Poonawalla group as per the deal announced earlier this year, will allot 45,80,00,000 preferential shares to RSHPL for a consideration of Rs 3,206 crore.

Besides, Sanjay Chamria and Mayank Poddar (both members of the promoter and promoter group company) will be allotted 1,78,57,143 shares and 1,78,57,143 shares respectively for Rs 125 crore each.

Chamria is the Vice Chairman and Managing Director of the Kolkata-headquartered NBFC.

The transaction would result in the Rising Sun Holdings taking a controlling stake of 60 per cent in the post issue capital of the company.

With this capital infusion, Rising Sun Holdings would also be classified as promoter of the company, together with the existing promoter group. The existing promoters will hold 13.3 per cent stake post issuance of preferential shares.

The networth of the company will increase to over Rs 6,300 crore post the issuance.

Besides, Rising Sun Holdings will nominate Poonawalla as the chairman of the board, while Abhay Bhutada, presently MD and CEO of Poonawalla Finance is proposed to be appointed as the Managing Director, while Chamria will continue on the board as the executive vice chairman.

Also, Magma Fincorp and its subsidiaries will be renamed and branded under the Poonawalla Finance brand. And the existing financial services business of Poonawalla Finance is proposed to be consolidated.

On the approval, Adar Poonawalla said "I look forward to quick completion of the transaction subject to regulatory and statutory approvals and fulfil the vision of serving the huge underserved segments of the society and building a great franchise."

Chamria said on boarding of Poonawalla as the promoter will prove to be a huge shot in the arm for the business prospects and future of the company and its employees, bankers, customers and shareholders.

"Now we will work towards getting regulatory approvals and completing statutory formalities so that the transaction can be consummated quickly," he said.

Magma Fincorp operates in retail finance, SME finance, housing finance and general insurance business. It has been catering for three decades to semi-urban and rural markets as a systemically important non-deposit taking NBFC.

The company's asset under management (AUM) stood at Rs 15,006 crore as of 31 December 2020 compared with Rs 16,134 crore a year ago same period. Magma shares closed at Rs 129.95 apiece on BSE, up 3.96 per cent from the previous close.