New Delhi, Feb 11: A company controlled by Adar Poonawalla, Rising Sun Holdings Private Limited and Magma Fincorp Limited have announced a transaction for preferential issue of equity shares of Magma Fincorp which will result in a controlling stake being taken by Rising Sun Holdings and an open offer as per Public Announcement made under SAST guidelines. Adar Poonawalla, is the CEO of Serum Institute of India.
The preferential allotment is for an aggregate value of Rs 3,456 crore, subject to shareholders’ and other regulatory approvals.
The preferential allotment represents 64.68 per cent of MFL’s enhanced equity share capital post the issue. Based on current shareholding, Rising Sun Holding would hold 60.0 per cent stake in the entity post issuance and the existing promoter group stake would get reduced to 13.3 per cent post issuance. The Net Worth of Magma Fincorp shall increase to over Rs 6,300 crore post the issuance.
Following the preferential issue, Rising Sun Holdings would be classified as “Promoter” of Magma Fincorp. Magma Fincorp Ltd. and its subsidiaries shall be renamed and rebranded under the brand name “Poonawalla Finance”, subject to regulatory approvals.
Subsequent to the completion of the preferential allotment, the existing financial services business of Poonawalla Finance is proposed to be consolidated into Magma Fincorp subject to compliance with extant regulations.
Rising Sun Holdings intends to nominate Adar Poonawalla as the Chairman of the Board of Directors and Abhay Bhutada, presently Managing Director & CEO of Poonawalla Finance, as Managing Director. Sanjay Chamria would continue as the Executive Vice Chairman of the Board. The management team will be further strengthened through the appointment of a professional CEO & COO.
A statement said Rising Sun Holdings values the strength of the existing network and employees of Magma Fincorp, and the acquisition of a controlling stake along with huge capital infusion is expected to have a positive impact on the business operations, including for customers, employees, lenders and other stakeholders.
It said Adar Poonawalla and Magma Fincorp clearly believe that the transaction would be in the best interests of all the stakeholders and post transaction, the Magma Fincorp would be uniquely placed to leverage the vast opportunities in the lending space with expected reduction in borrowing cost. Strong corporate backing and substantial fund infusion is likely to have a positive effect on the credit rating of the company as well. This infusion would also enable Magma Fincorp to further invest in its Housing Finance subsidiary and General Insurance joint venture, as required.
Commenting on the proposed transaction, Adar Poonawalla, Director, Rising Sun Holdings Private Limited said, “I am excited at this opportunity to infuse majority capital for controlling stake of Magma Fincorp. I see an unlimited potential in India in the financial space as our economy is poised to grow in double digits and this ties in with our Group philosophy of serving the needs and dreams of the nation, and financial service plays an important role in supporting and fuelling the growth of our country. This transaction is subject to statutory and regulatory approvals.”
Commenting on the proposed transaction, Chamria, Vice Chairman and Managing Director, Magma Fincorp Limited said, “Considering the positives in the deal by way of huge capital infusion, strong brand value and ability to attract top notch talent, the Board of the Company has rightly decided to accept an offer for a substantial equity infusion into the Company.”