Magma Fincorp to seek shareholders nod for Rs 3,206 cr deal with Poonawalla

Magma Fincorp said it is holding an EGM next month to seek shareholders' approval to the preferential allotment of shares to Adar Poonawalla-controlled Rising Sun Holdings (RSHPL)

Magma Fincorp on Saturday said it is holding an EGM next month to seek shareholders' approval to the preferential allotment of shares for Rs 3,206 crore to Adar Poonawalla-controlled Rising Sun Holdings (RSHPL) to give it a controlling stake in the NBFC.

Besides, the company has proposed allotting preferential shares to two members of promoter group for Rs 250 crore, taking the total capital infusion to Rs 3,456 crore.

An extraordinary general meeting (EOGM) of the members of Magma Fincorp will be held on Tuesday, March 9, 2021, Magma Fincorp said in a regulatory filing.

The EOGM will transact the special business for preferential allotment of equity shares of the company to issue and allot 49,37,14,286 equity shares of the company, having face value of Rs 2, at a price of Rs 70 per equity share and for an aggregate consideration of Rs 3,456 crore, on a preferential basis, Magma Fincorp said.

The Kolkata-headquartered NBFC will allot 45,80,00,000 equity shares to Rising Sun Holdings Pvt Ltd for an aggregate consideration of Rs 3,206 crore and 1,78,57,143 equity shares each to Sanjay Chamria and Mayank Poddar for Rs 125 crore each.

Chamria, the Vice Chairman and Managing Director of the company, and Poddar are members of promoter and promoter group company.

Earlier this week, Magma had informed about the preferential allotment of shares to these three entities.

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.

Also, 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. Chamria will continue on the board as the executive vice chairman.

Among others, 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.

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 period.

On the pandemic induced hardships to the NBFC sector as well as the stress since September 2018, Magma Fincorp said demand for credit in various segments is showing positive trend month-on-month.

"The company continues its efforts on strengthening the balance sheet through superior management of collections, control on operating expenses and maintaining strong provision buffers. The company is also focused on high ROA products for fresh disbursals i.e. used assets, agri loans, auto leasing, SME and affordable housing."

While the overall AUM has seen a declining trend, the AUM in focus product segments has remained stable at Rs 11,124 by end of December quarter against Rs 11,285 crore year ago, it said.