Funds advised by Kohlberg Kravis Roberts & Co (KKR) along with International Finance Corporation (IFC) have led an investment of INR4.4bn in Magma Fincorp.
IFC’s investment is subject to the approval of the Board of IFC, shareholders of Magma and relevant regulatory authorities. The capital infusion will be used to support Magma’s growth plans in existing businesses in addition to newer areas.
“For this round of capital raise, we have carefully selected partners, who believe in Magma’s business model, people wealth, distribution franchise and asset quality and are providers of long-term strategic capital that can support Magma attain the next level of growth. Maintaining our aggressive growth pattern, we expect to increase our disbursements by 50% in FY12, reduce our dependency on securitisation and maintain a healthy NIM via greater contribution from higher yielding products.
"This transaction is not just about capital but the foundation of a lasting partnership. KKR and IFC each have a track record of success in India, as well as a history of working with management and building world-class enterprises. With this capital infusion, we believe Magma is well positioned to capitalise on its existing business opportunities, increase its thrust into new products in addition to accretive M&A," says Sanjay Chamria, Vice Chairman & Managing Director of Magma.
Sanjay Nayar, a Member of KKR and Head of KKR India, says: “This is a long term investment in Magma, a company led by enterprising promoters who have built an impressive platform of sound risk management and credit underwriting capabilities. “We believe that our partnership will help propel the growth in rural and semi urban segments by promoting consumer credit, agri lending and corporate lending to small and medium scale enterprises."
The International Finance Corporation is a member of the World Bank Group and is headquartered in Washington. IFC has made several investments in India across infrastructure, clean energy, agribusiness, manufacturing, health and education sectors including in the financial services space. The proposed investment by IFC will provide Magma with strategic capital and will enable the Company to expand its footprint in semi-urban and rural areas as well as in Indian states of Bihar, West Bengal, Orissa, Chattisgarh, UP, Rajasthan etc, thereby contributing to financial inclusion in India.
Ernst & Young (Advisory) and Wadia Ghandy advised Magma on the transaction. Ernst & Young (Transaction Advisory), McKinsey & Co., Simpson Thacher & Bartlett, AZB Partners and Kotak Mahindra Capital advised KKR on the transaction.