InvestorQ : Why has Adar Poonawala bought a stake in Magma Fincorp? What is the advantage you see?
Chandralekha Desai made post

Why has Adar Poonawala bought a stake in Magma Fincorp? What is the advantage you see?

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NISHA Nayak answered.
4 months ago
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I understand your question because even the markets were quite surprised as to why a company that is in the forefront of the COVID vaccine drive is also buying a stake in an NBFC. It was therefore a rather surprising move when Rising Sun Holdings controlled by Adar Poonawala, announced that it will be acquiring a 60% in Magma Fincorp for a consideration of Rs.3,456 crore. The synergy is not too clear at this point.

Once the deal is completed, the Poonawala group company, Rising Sun, becomes the promoter of Magma Fincorp. As a result, the company will also get rebranded as Poonawala Finance. Magma is an NBFC and currently has an AUM of Rs.15,006 crore as of Dec-20. Subsequent to the preferential allotment to Poonawala, Rising Sun will own 64.68% of the enhanced equity base of Magma Fincorp.

However, the existing promoters will continue to hold a minority 13.33% in Magma. The net worth post the infusion will increase to Rs.6,300 crore and that is likely to give heft to the balance sheet. For Magma the benefits are clear as it can use the capital infusion to improve productivity and operating matrix. The deal will permit Magma to reduce its borrowing costs. However, we need to await further clarity on what is in it for the Poonawala group.

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