KKR, Indium and LeapFrog to invest in Magma Fincorp

Rs 500 crore investment to fuel business growth

Kolkata: Magma Fincorp Ltd. (“Magma”) today announced that its Board of Directors have approved preferential allotment of equity shares worth Rs 500 crore (~US$80 million) to a clutch of investors including KKR; Indium V (“Indium V”), an investment vehicle advised by India Value Fund Advisors (“IVFA”); and LeapFrog Investments (“LeapFrog”). The transaction is subject to customary regulatory approvals.

Indium and LeapFrog, both new investors in the company, will invest Rs 220 crore and Rs 200 crorerespectively. KKR, which first invested in Magma in 2011, will inject an additional Rs 80 crore.The company will issue 4.63 crore equity shares at a price of Rs 108 per share (face value of Rs 2 and a premium of Rs 106).

Magma will use the new capital to grow its business and capture opportunities created by India’s economic growth and improving financial markets.

“For this round of investment, we have carefully selected partners who are firm believers in India’s growth story and believe in Magma’s business model, people wealth, asset quality and outstanding customer relationships in the rural and semi-rural India. They are providers of long-term strategic capital that can help Magma attain the next level of growth. This transaction is not just about capital but the foundation of a lasting partnership. While the Mauritius-based LeapFrog Investments is now one of the world’s largest impact investment funds, investing in financial services companies across Asia and Africa, Indium V is a premier private equity investment fund focused on India. This will be the second investment by KKR into Magma. All three organisations have rich history of working with the management and building world-class enterprises. All the investors share the long term vision of Magma to create a world class financial services organization. We look forward to their contribution across strategic and operational aspects of the organization. Our existing investors KKR, by retaining their stake in the company, have reaffirmed their belief in the growth prospects of the company”, said Mr Sanjay Chamria, Vice Chairman & MD of Magma Fincorp Ltd.

“KKR has been a committed partner to Magma since our original investment. As the Indian economy continues to recover, it has reaffirmed our confidence in the longer-term Indian growth story. We continue to believe that rural and semi-urban financial inclusion will be a key element of this growth and Magma is a unique platform that can actively drive this financial inclusion. We hold the Magma management team in the highest regard and look forward to our continued involvement as they grow Magma to new heights”, commented Mr Sanjay Nayar, Member & CEO of KKR India.

“Magma has a stellar reputation of transparency in India. This is a long-term investment for Indium in a company which has successfully built a model of financial inclusion through providing equality of opportunity to the disenfranchised. Led by enterprising promoters who have built an impressive platform of sound risk management and credit underwriting capabilities, this investment is re-affirming faith in their winning model. Indium believes that this 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 enterprise”, said Mr Vishal Nevatia, Managing Partner of IVFA on behalf of Indium V.

“We chose Magma because we believe in the India growth story and believe that it presents the largest potential for financial returns and social impact. Millions of people in India would like to start a business, or plant a new crop, or send their children to school rather than to work. The Indian rural population wants to grow and that’s where Magma has been working for the past two and half decades. The proposed investments will provide Magma with strategic capital and will enable the Company to expand its footprint deeper into these untapped markets, thereby contributing to financial inclusion in India. We hope our investment will give wings to people’s dreams and fulfil the aspirations of millions”, said Mr Michael Fernandes, Partner at LeapFrog

Ambit Corporate Finance was the exclusive financial advisor and Wadia Ghandy & Co was the legal advisor to Magma.