Vaccine Billionaire’s Buyout of Indian Shadow Bank Boosts Stock
(Bloomberg) -- Magma Fincorp Ltd., an Indian financier for vehicles and homes, surged to the highest in 19 months after the chief executive officer of the world’s biggest maker of vaccines said he’s buying control of the shadow lender.
The company’s shares hit the bourse’s daily upper circuit with a 10% gain to 93.55 rupees in Mumbai on Thursday, set for the highest since July 2019. Adar Poonawalla, CEO of Serum Institute of India Ltd., which is manufacturing the coronavirus vaccine developed by AstraZeneca Plc and the University of Oxford, will spend 32.1 billion rupees ($441 million) to acquire a 60% stake in the Kolkata-based financier.
Poonawalla is expanding his shadow banking business just as the industry is showing signs of recovery following a crisis that started with the collapse of a non-bank financier in 2018. The pandemic had made it harder for small shadow lenders such as Magma Fincorp to raise money, said Jyoti Roy, deputy vice-president at Angel Broking Ltd.
“The presence of a deep-pocketed investor will help Magma Fincorp to step up its business,” Roy said. “Valuations in the Indian shadow banking space have come off significantly in the last two years and there are quite a few such small shadow lenders who are up for sale at attractive prices.”
Magma Fincorp and its subsidiaries will be renamed and branded as Poonawalla Finance, Magma said in a filing late Wednesday. The deal raises Magma Fincorp’s capital adequacy to 68% from 28% end-December, subject to regulatory clearance. Poonawalla’s acquisition vehicle -- Rising Sun Holdings -- will also make an open offer for the rest of Magma’s shares at 70 rupees each, some 25% discount to the current price.
The stock rose on Thursday for a ninth consecutive session, putting it on course for its longest run of gains since June. It has surged 107% so far this month, after a nearly 13% jump in January.
“There’s a huge void we saw with certain other non-bank finance companies going belly up and that has given space for new entrants to come in,” Adar Poonawalla said in an interview with ET Now television. “I don’t want to get into large-ticket loans, real estate sector, corporates and all that,” he said, adding that he’s comfortable with Magma’s typical loan size of as much as 5 million rupees.
He will be chairman of the company and Sanjay Chamria will be executive vice chairman. Poonawalla’s flagship Serum Institute has an agreement with AstraZeneca to roll out at least one billion doses of the coronavirus vaccine.
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