Mumbai, March 16 (PTI) Magma Fincorp will increase its stake in insurance company Magma HDI through the sale of shares in ICICI Venture, Morgan Stanley PE, a Poonawalla Group company and others in a crore deal for Rs 525 to reduce.
Magma HDI is a joint venture between Magma Fincorp and the German HDI Global SE. Since the beginning of February, Rising Sun Holdings, controlled by Adar Poonawalla – a branch of Poonawalla Finance – has held a 60 percent stake in Magma Fincorp.
The present deal includes ICICI Venture, Morgan Stanley Private Equity Asia and Cyza Chem – a company of the Poonawalla Group – as well as two family offices as new shareholders, bringing in Rs 525 crore. Out of the total amount, 250 rupees will be the main capital, Magma HDI said in a statement on Tuesday.
The deal will also allow Magma Fincorp and its group companies to reduce their direct stake in the insurance company to 50 percent in accordance with RBI guidelines.
The RBI standards limit an NBFC’s direct participation in insurance companies to 50 percent. Magma Fincorp is an NBFC.
In March 2019, Magma Fincorp sold 9.9 percent of the shares in Magma HDI to the Serum Institute of India, a company of the Poonawalla Group. Magma now holds 66.79 percent of the insurance company and HDI has 26 percent.
After the last Crore transaction in the amount of 525 rupees, the Poonawalla Group will become the main sponsor with a direct and indirect stake of around 30 percent in Magma HDI, while HDI will be the largest single shareholder with a stake of 17.1 percent. The remaining share of HDI will be dumped through a second sale.
ICICI Venture becomes the third largest shareholder with a 16.7 percent stake in Magma HDI.
Rajive Kumaraswami, managing director and managing director of Magma HDI, informed PTI that Magma Fincorp and other promoters will hold 50 percent of the shares in the insurance company upon conclusion of the contract.
“ICICI Venture is making the largest fund infusion of Rs 240 billion, of which Rs 156 billion is fresh capital and Rs 83.4 billion is secondary sales, which is 16.7 percent.
“Morgan Stanley is infusing Rs 143 crore of which Rs 93 crore is fresh capital and Rs 49 crore is part of secondary sales, giving it a 9.9 percent control, and Poonawalla firm Cyza Chem brings Rs 84 crore through secondary sales Sale of equity, which corresponds to an additional share of 5.9 percent.
“It already owns around 15 percent as it owns 60 percent of Magma Fincorp, which will continue to own 24.2 percent of the insurer,” said Kumaraswami.
After the deal, Magma Fincorp, the Poonawala Group and other Magma companies will jointly own 50 percent through an SPV called Jaguar and family offices of Havels Group and Atul Nisar of Hexaware Technologies (who split the remaining Rs 57 crore equally).
Of that, Cyza Chem owns 5.89 percent, and Magma Group’s promoter Sanjay Sanjay Chamria will own 13.3 percent.
The transaction is subject to shareholder and regulatory approvals, including the Irdai Insurance Commission and the Competition Commission.
Adar Poonawalla, Chief Executive Officer of Serum Institute and Chief Financial Officer, said: “We are delighted to continue our support as shareholders of Magma HDI and I see great potential in the growth of Magma HDI, a young and fast growing company. We are confident that that it can develop its full potential in the next few years. ”
Abhay Bhutada, managing director of Poonawalla Finance and head of Magma Fincorp, said this capital injection will further increase Poonawalla Group’s direct involvement in the insurance business.
Puneet Nanda, managing director and chief executive officer of ICICI Venture, said they are excited about the prospects the underserved insurance sector has to offer.
Nirav Mehta, Managing Director of Morgan Stanley PE Asia said: “The Indian general insurance sector is facing a period of structural growth and Magma HDI is well positioned to take advantage of this opportunity.”
Magma HDI has been one of the fastest growing non-life players at 45 percent per year for the past three years.
For the first nine months of the fiscal year, the company had net income of Rs 22.3 billion on gross written premiums of Rs 91.2 billion, compared with net income of Rs 7.3 billion on premium income of R 948.5 billion Rupees per year.
Magma HDI has 133 branches with over 1,000 employees and has served over 40 Lakh customers to date.
Ambit Capital was the sole financial advisor and Wadia Ghandy was the legal advisor on the transaction. PTI BEN RAM ABM ABM ABM
Disclaimer: – This story was not edited by Outlook staff and is automatically generated from news agency feeds. Source: PTI
More from Outlook Magazine