Magma Fincorp taps KKR, IFC to raise Rs 440 cr; stock down

MUMBAI | KOLKATA: Kohlberg Kravis Roberts & Co agreed to buy 14.9% in Magma Fincorp, a Kolkata-based lender for trucks and farm equipment, at a 27% premium to benefit from the soaring growth in Indian logistics and agriculture.

International Finance Corporation (IFC) also agreed to buy 12% of the company purchasing new shares, the company said in a statement. The new share sale to these funds will help it raise Rs 440 crore.

At 10:15 am, shares of Magma Fincorp were trading 2.13 per cent down at Rs 73.35 on the Bombay Stock Exchange.

Magma Fincorp, which is in the business of lending loans against trucks, farm equipment and small business, manages over Rs 10,000 crore of assets and has allotted over Rs 5,000 crore of loan. It will use this money for expansion and maintenance of its CAR, said the company in a press conference in Mumbai.

Capital adequacy ratio (CAR) is a measure of strength for lenders, such as banks, that protects depositors and other stakeholders.

The sale has been concluded at 88 per share, compared with Friday's undisturbed close of 69.4 apiece. The shares rose 8% on Monday to 74.95. The two investors will own around 27.75% of the company's shares post the issue of fresh equity.

Magma Fincorp has roped in PE players because of strict borrowing norms prescribed by RBI. In the recent budget announcement, the central bank has removed 'priority sector' status for NBFC borrowings, increased the capital adequacy ratio from 12% to 15%. This means the cost of money will go up for financial companies.

The promoter ownership after this deal will reduce to 30% from 41% and foreign investors will own 29% in the company from 40%.