PE-backed Magma Fincorp has signed definitive agreements for the acquisition of 100 per cent equity share capital of GE Money Housing Finance (GEMHF), an affiliate of GE Capital India and engaged in the housing finance business in the country.
The Kolkata-based non-banking finance company (NBFC) has acquired Rs 660 crore loan assets of GEMHF, a firm which had net worth of about Rs 193 crore as of March 31, 2012. It has also acquired the entire home equity loans portfolio of GE Money Financial Services with about Rs 940 crore loan assets, as of May 31, 2012. Post-acquisition, GE Money Housing Finance will be renamed as Magma Housing Finance.
Although the deal amount was not disclosed, a top company executive told VCCircle it is pegged at book value.
The capital adequacy ratio of GEMHF is over 40 per cent, well above the mandatory 12 per cent, said Sanjay Chamria, vice-chairman & managing director of Magma Fincorp. He also added that the acquisition would be funded through a mix of debt and equity. The company has approached 20 banks for the debt portion including the State Bank of India, Punjab National Bank, ICICI Bank, Bank of India and Bank of Baroda. Magma pegs the cost of funds for the debt at 10.25-11 per cent.
In August this year, Magma Fincorp appointed Sachin Khandelwal as the CEO for Magma Housing Finance, a new subsidiary of the public-listed Magma Fincorp. In addition, Sandeep Walunj was named as the chief marketing officer of Magma Fincorp.
“The net worth of GEMHF amounting to Rs 193 crore would be direct Tier I capital for Magma and there is no premium paid in the deal. The non-performing assets in the acquired portfolio is lower than the industry average,’’ added Khandelwal.
He also said that post-acquisition, the capital adequacy ratio of Magma would continue to be 17 per cent and it would not require additional funding for the business growth.
The company said that the Rs 940 crore portfolio acquisition of GEMFSPL, the non-banking financial services arm of GE Capital, would be acquired through debt.
Magma Fincorp has assets under management of Rs 14,650 crore and has a customer base of Rs 7 lakh. The company has 80 per cent of its branches in rural and semi-urban areas with 7,000 employees.
In May 2011, the NBFC attracted Rs 440 crore in funding from KKR and IFC.
“We are supportive of growing our investee companies strategically. This acquisition fits in well with Magma’s intent to diversify its retail finance portfolio while leveraging its existing platform and customer base,’’ said Sanjay Nayar, non-executive member of the board of Magma Fincorp and head of KKR India.
Ambit Corporate Finance was the exclusive financial advisor to Magma in the acquisitions. Udwadia, Udeshi & Argus Partners acted as legal advisors to Magma.
Magma’s entry into the housing finance space is an extension of its existing business that revolves around financing of utility vehicles, cars, commercial vehicles, construction equipment, tractors and SME loans.
The average loan size of the acquired portfolio was Rs 17 lakh and it is present in 55 locations in Tier II and Tier III areas. After the acquisition, the housing finance portfolio would make it the fifth largest product in the Magma portfolio and the company also plans to penetrate deeper into the rural areas.
(Edited by Sanghamitra Mandal)