Adar Poonawalla firm to take control of Magma Fincorp

 Adar Poonawalla firm to take control of Magma Fincorp

A company led by vaccine maker Serum Institute of India’s CEO Adar Poonawalla is set to acquire a 60% stake in non-banking finance company Magma Fincorp Ltd for Rs 3,206 crore ($440 million).

Poonawalla-led Rising Sun Holdings Pvt. Ltd will acquire the stake through a preferential subscription of Magma Fincorp’s shares at Rs 70 apiece, the NBFC said in a statement Wednesday.

Shares of Magma Fincorp jumped 10% to close at Rs 84.95 apiece on Wednesday, after climbing 10% on Tuesday and 20% the day before. The shares surged another 10% on Thursday to close at Rs 93.40 apiece.

Magma Fincorp said that it will also allot shares worth Rs 250 crore on a preferential basis to current promoters Sanjay Chamria, who is the managing director and vice-chairman, and chairman emeritus Mayank Poddar.

The preferential share allotment will represent 64.68% of the enhanced equity share capital of Magma Fincorp. The existing promoter group’s stake in the NBFC will drop to 13.3% from 24.39%.

Rising Sun, Chamria and Poddar have also made an open offer to buy an additional 26% stake in Magma Fincorp from its public shareholders, as per the capital markets regulator Securities and Exchange Board of India’s rules. Assuming full acceptance in the open offer, Rising Sun, Chamria and Poddar will shell out another Rs 1,392 crore.

Magma Fincorp’s public shareholders include Indian private equity firms True North and ChrysCapital as well as International Finance Corporation, the private-sector arm of the World Bank. The NBFC was previously backed by US-based PE giant KKR & Co, which exited in 2018 reportedly with a two-fold return on its investment.

Overall, Magma Fincorp will raise Rs 3,456 crore through the preferential allotment of shares to Rising Sun and its current promoters. The transaction will also expand its net worth to Rs 6,300 crore, taking its capital adequacy ratio to 68% from 28% at the end of December.

Upon the completion of the share transfer, the existing financial services business of Poonawalla Finance will be consolidated with Magma Fincorp’s business. The combined company will be called Poonawalla Finance.

Adar Poonawalla will be the chairman of the combined company. Poonawalla Finance managing director and CEO Abhay Bhutada will be the MD. Chamria will continue as the executive vice chairman.

Adar Poonawalla also leads vaccine maker Serum Institute, which is one of the main suppliers in India and abroad of the coronavirus vaccine developed by AstraZeneca and Oxford University.

Pallavi S

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