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The Poonawalla group has been preparing for its maiden equity raise since it took over Magma Fincorp in February 2021. The housing finance arm Poonawalla Housing Finance is set to roll out ₹1,000 crore preferential issue . Last week, the company’s board approved the fundraising. Poonawalla Housing (erstwhile Magma Housing Finance) is a subsidiary of Poonawalla Fincorp.
Confirming this, the company spokesperson said the issuance might translate to a 15 per cent stake offered to the investors. This is in line with the guidance of the Poonawalla Fincorp in its analyst meeting held on July 28. Poonawalla Housing has floated the information memorandum for the capital raise and a preliminary list of interested investors will be evaluated within two weeks.
“The fund raise has been in the talks since December last year and finally things are materializing now,” said a person aware of the matter.
The company has appointed Ashok Wadhwa-led Ambit Capital as the investment banker for the issue. Sources with knowledge of the matter say while the mandate is to raise capital by the end of FY23, efforts are on to close the fundraise in a quarter or two.
Valuations matter
Even as the company stated a capital dilution of 15 per cent, persons aware of the matter say up to 20 per cent shareholding may be offered for sale.
If valuations offered by the investor are compelling enough, the company may consider a higher proportion of preferential allotment as well. Poonawalla Housing’s net worth and assets under management stood at ₹1,114 crore and ₹5,282 crore, respectively, as on June 30, 2022. Affordable housing accounts for 30 per cent of its total loans. At 15-20 per cent equity dilution, the company’s valuations work out ₹ 5,000–6,600 crore.
However, valuations of housing finance companies, especially those operating in the affordable housing space, have shrunk by 20–30 per cent in the last six months, and if seen from the prior pandemic times, there hasn’t been much valuation appreciation in the last two years.
Barring Aavas Financiers, a leading player in the affordable housing market trading at over 6x its book, others have seen a sharp contraction to 4.4–4.6x price to book in the last six months. “Although Poonawalla Housing has only 30 per cent exposure to affordable housing, given its small book size and its customer profile, it will fetch the valuations of affordable housing business and not be treated like a pure-play housing finance company,” said a person aware of the deal.
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