Rising Sun Holdings Pvt Ltd controlled by Adar Poonawalla, CEO, Serum Institute of India, has decided to acquire a 60 per cent stake in Mumbai-based non- banking finance company Magma Fincorp for ₹3,456 crore.

“Rising Sun Holdings and Magma Fincorp on Wednesday 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,” the two companies said in a statement.

As part of the transaction, Magma Fincorp proposes to allot 45.8 crore shares to Rising Sun Holdings, and 3.57 crore shares to Mayank Poddar, Chairman and Non-Executive Director, and Sanjay Chamria, Vice-President and Managing Director, Magma Fincorp.

Following the preferential issue, Magma Fincorp and its subsidiaries will be renamed and rebranded under the Poonawalla Finance brand name.

Post the transaction, Rising Sun Holdings will consolidate the business of Poonawalla Finance Private Ltd with Magma Fincorp, according to a regulatory filing.

Rising Sun Holdings would hold 60 per cent stake in the entity post issuance and will get classified as the promoter. The existing promoter group’s stake would get reduced to 13.3 per cent while Chamria and Poddar would hold 2.34 per cent each in the company.

For the quarter ended December 31, 2020, promoter and promoter group stake in Magma Fincorp stands at 24.39 per cent with the remaining 75.61 per cent holding with public shareholders.

“This is a very significant fund raise, our current networth is about Rs 2,560 crore and this is about Rs 3,450 crore. It is more than 150 per cent of our current networth and with this issuance the net worth will increase to over Rs 6,300 crore,” Chamria told BusinessLine, adding that it is subject to regulatory and shareholder’s approval.

“Magma on its own was finding it difficult to compete with the big boys due to their capital base, huge corporate backing, cost of funds being higher, rating not being so high. Such a large group with so much cash reserves will provide a lot of strength to Magma in terms of credit rating, dealing with the banking system and have a lower cost of funds,” he further noted.

“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,” said Poonawalla, who is also CEO, Serum Institute of India.

Rising Sun Holdings plans to nominate Poonawalla as the Chairman of the company and Abhay Bhutada, who is at present Managing Director and CEO of Poonawalla Finance, as Managing Director. 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 and COO,” the statement said.

The Board of Magma Fincorp has decided to convene an Extra Ordinary General Meeting on March 9 to seek approval of the shareholders for issuance of equity shares on a preferential basis.

The company is hopeful of also getting regulatory clearances at the earliest. Economic Laws Practice is acting as the tax and transaction advisor and Khaitan & Co is acting as the legal advisor and Axis Capital is acting as the merchant banker to the open offer to Rising Sun Holdings.

Deloitte Touche Tohmatsu India is acting as the financial advisor to Magma Fincorp, Wadia Ghandy & Co is acting as legal advisor and Vinod Kothari & Co is acting corporate law advisors to Magma Fincorp.