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Adar Poonawalla owned firm to buy controlling stake in non-bank lender Magma Fincorp
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Serum Institute CEO Adar Poonawalla owned Rising Sun Holdings is acquiring a controlling stake in non-bank lender Magma Fincorp Ltd (MFL), the company said in a late Wednesday evening disclosure with the Bombay Stock Exchange.

The board of directors of Magma Fincorp accepted a binding offer for a Rs 3,456 crore infusion through the preferential issue of 49.37 crore equity shares at Rs 70 per share, the company said in the disclosure.

The deal, “is subject to shareholders’ and other regulatory approvals and represents 64.68% of MFL’s enhanced equity share capital post the issue,” it added.

Magma Fincorp is backed by private equity firms True North, ChrysCapital, LeapFrog Investments, Netherlands Development Finance and World Bank’s private investment arm International Finance Corporation (IFC).

Rising Sun Holdings, a company controlled by Poonawala in his personal capacity, will hold 60.0% stake post issuance while Magma Fincorp promoters Sanjay Chamria and Mayank Poddar will own 13.3% post issuance, owning 3.5 crore equity shares.

MFL’s promoters including the Poddar family currently hold 24.39% in the NBFC (non banking finance company).

The net worth of MFL will increase to over Rs 6,300 crore post the issuance, the statement said.

Rising Sun Holdings will nominate Poonawalla as the chairman of the Board and Abhay Bhutada, presently managing director and CEO of Poonawalla Finance is proposed to be appointed as the managing director of the new entity. Chamria will continue on the board of the company as executive vice chairman.

Following the preferential issue, Rising Sun Holdings would be classified as the promoter of MFL and the NBFC and its subsidiaries will be rebranded as Poonawalla Finance. The existing financial services business of Poonawalla Finance is proposed to be consolidated, subject to regulatory approvals.

The deal also includes an open offer as per SEBI norms.
 

Rising Sun Holdings

Part of the $12 billion Cyrus Poonawalla Group, Poonawalla Finance Pvt Ltd (formerly known as Adar Poonawalla Finvest Pvt Ltd) is already engaged in providing loan services. Incorporated in 1985 and based in Pune, Maharashtra, it offers business loans for unsecured business loans, loans to professionals, chartered accountants, doctors and architects, and salaried loans such as personal loan and anyday salary.

Poonawalla Finance made a net profit of Rs 30 crore in financial year 2019-2020 (FY20) against Rs 22 crore the previous year. Its net sales stood at Rs 87 crore as compared to Rs 75 crore in FY19.

Rising Sun Holdings also holds investments in Svasti Microfinance and Mumbai-based pharmacy chain Wellness Forever Medicare Pvt Ltd.

Founded in 1988 in Kolkata, Magma Fincorp Ltd (formerly known as Magma Shrachi Finance Ltd) is engaged in the business of providing loans. It operates as Magma Group from Mumbai, facilitating financing for tractors, commercial vehicles, construction equipment, cars and used vehicles, and mortgage loans to micro, small and medium enterprises.

It also has a presence in the general insurance business through a joint venture with Germany’s HDI Global SE, while Magma Housing Finance is a fully-owned subsidiary of the company. It is largely focused on the rural and semi-urban sector with presence across 21 States and 298 Branches. Magma’s customer base has crossed 5 million and the company manages a loan book of Rs 15,006 crore.

In 2017, LeapFrog Investments made a partial exit with about 30% returns by selling 2.2% stake in the NBFC after over two years of its investment. A year later Kohlberg Kravis Roberts (KKR) logged out of  its investment in MFL by selling its 14.09% stake.

The same year, Amansa Holdings Pvt Ltd, through its affiliate Amansa Capital Pte Ltd, picked up a 3.83% stake; ICICI Prudential Life Insurance Company Ltd and HDFC Standard Life Insurance Co Ltd acquired a 1.68% stake; Goldman Sachs India Ltd, via Goldman Sachs Asset Management India Pvt. Ltd, owned a 1.44% stake; and DB International Asia Ltd, through an affiliate of DB International GmbH, picked up a 0.60% stake.

For the October to December quarter 2020, the company’s net profit declined by 42% at Rs 12.99 crore as against Rs. 22.39 crore in December 2019. Its net sales also edged down 3.24% to Rs 589.33 crore from Rs. 609.06 crore in December 2019.

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