Adar Poonawalla group firm makes open offer to buy additional stake in Magma Fincorp

Adar Poonawalla-controlled Rising Sun Holdings Pvt Ltd along with two other individuals have made an open offer to buy an additional 26 per cent stake in non-banking financial company Magma Fincorp for a consideration of more than Rs 1,391 crore.

Earlier this month, the Poonawalla Group and Magma Fincorp announced that the group will acquire a controlling 60 per cent stake in the company by way of a Rs 3,456-crore-worth preferential issue of shares.

Besides Rising Sun, Magma Fincorp will allot preferential shares to two members of the promoter group -- Sanjay Chamria and Mayank Poddar -- for Rs 250 crore, taking the total capital infusion in th company to Rs 3,456 crore.

The preferential allotment represents 64.68 per cent of Magma's enhanced equity share capital post-issue and based on the current shareholding, Rising Sun will hold 60 per cent stake and the existing promoter group's stake will come down to 13.3 per cent.

The promoter and promoter group currently hold 24.39 per cent in Magma.

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Axis Capital, which has been appointed as the manager for the open offer by the three acquiring entities, submitted details about the open offer to the stock exchanges on Wednesday.

The open offer is to acquire up to 19,88,32,105 equity shares, constituting 26 per cent of the expanded voting share capital at a price of Rs 70 apiece. The total consideration would be little over Rs 1,391.82 crore, as per an offer document submitted by Axis Capital.

As per Sebi norms, pursuant to substantial acquisition of shares or change in control in a listed firm, an acquirer has to make an offer to the public shareholders so as to give them a fair opportunity to exit the company.

Under the proposed deal, Magma Fincorp proposes to allot 45.80 crore or 60 per cent shares to Rising Sun, and 3.57 crore shares to Chamria and Poddar.

Chamria is the Vice Chairman and Managing Director of Magma Fincorp and Poddar is the Chairman Emeritus and a Non-Executive Director of the Kolkata-based company. Magma Fincorp has convened a meeting of shareholders next month to seek their approval for the proposed deal.

Pune-based Poonawalla Group also owns vaccine maker Serum Institute of India and Poonawalla Finance, which lends mostly to professionals.

Upon the completion of the deal, Rising Sun Holdings would be classified as promoter of Magma Fincorp together with the existing promoter group.

Also, Rising Sun Holdings will nominate Poonawalla as the Chairman of the board while Abhay Bhutada -- presently MD and CEO of Poonawalla Finance -- is proposed to be appointed as the Managing Director.

Chamria will continue on the board as the Executive Vice Chairman. Magma Fincorp and its subsidiaries will be renamed and branded under the Poonawalla Finance brand.

Magma Fincorp's Asset Under Management (AUM) stood at Rs 15,006 crore at the end of December 2020.

Shares of the company rose 4 per cent to close at Rs 113.45 apiece on the BSE.

In a separate filing to stock exchanges, Magma Fincorp said ratings agency Icra has placed the company's long term fund based term loans (ICRA AA-) on watch with developing implications.

"The proposed capital infusion would be a positive for the group's capitalisation profile and would provide capital for both absorbing losses as well as fund growth over the medium term.

"The transaction is subject to regulatory approvals and Icra would monitor the developments on this transaction and would take suitable rating action once it has clarity on the proposed business model of the company and the likely impact on the various credit metrices, and other organisation-related changes," the rating agency said.