Magma Fincorp to raise $80M from IVFA, LeapFrog & KKR

Magma Fincorp Ltd, a non-banking financial company (NBFC) backed by a clutch of private equity funds, is looking to raise about Rs 500 crore ($80 million) through a preferential allotment of equity shares to two new investors—India Value Fund Advisors (IVFA) and LeapFrog Investments—besides participation from existing backer KKR.

The company will issue 46.3 million equity shares at a price of Rs 108 per share to all three investors, it said on Monday.

While private equity firm IVFA and impact investment firm LeapFrog will infuse Rs 220 crore and Rs 200 crore, respectively, KKR - which had invested in Magma in 2011, will inject additional Rs 80 crore.

KKR had previously invested around Rs 236 crore ($52.4 million then) to buy 14.95 per cent stake in Magma in May 2011. It currently holds over 16 per cent stake in the company.

Post the allotment, IVFA will own 8.6 per cent, LeapFrog will get 7.82 per cent while KKR will retain its 16 per cent holding, as per VCCircle estimates.

"The proposed investments will provide Magma with strategic capital and will enable the company to expand its footprint deeper into these untapped markets, contributing to financial inclusion in India,” said Michael Fernandes, partner at LeapFrog.

Vishal Nevatia, managing partner of IVFA, said the investment will help propel the growth in rural and small-and-medium scale enterprises by promoting consumer credit, agri-lending and more.

Magma focuses on lending to rural and semi-urban households for vehicle and construction equipment financing besides SME loans.

It also counts IFC and ChrysCapital as investors with 12.08 per cent and 9.9 per cent stakes, respectively, as on December 31, 2014. Their holding will shrink to 9.7 per cent and 7.9 per cent, respectively, after the proposed preferential allotment.

For the quarter ended December 31, 2014, Magma Fincorp posted a 24.86 per cent rise in its net profit to Rs 44 crore over the year-ago period. Total income from operations of the company in the quarter rose to Rs 616.81 crore from Rs 527.63 crore in the corresponding period.

On Monday, shares of Magma were trading at Rs 93.35 each, up 12.27 per cent at 1:00 PM on BSE in strong Mumbai market.

Ambit Corporate Finance was the exclusive financial advisor to Magma Fincorp for the transaction.

(Edited by Joby Puthuparampil Johnson)

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