CARE Ratings on Tuesday has placed the rating of
Magma Fincorp Limited’s (MFL) long and short term Bank Facilities (CARE AA- / CARE A1+) on watch with developing implication.
The company stock was bullish in early deals on Wednesday. At around 9.28 am, each stock was trading at Rs113.45 up by Rs5.4 or 5% from its previous closing of Rs108.05 on the BSE.
“CARE is of the view that pursuant to announcement of proposed preferential issue of equity shares of the company to Rising Sun Holdings Private Limited (RSHPL), a company controlled by Mr. Adar Poonawalla of The Cyrus Poonawalla Group. The preferential allotment proposed is for an aggregate value of Rs3,456cr and as part of the transaction the company proposes to allot 45,80,00,000 shares to RSHPL and 3,57,14,286 shares to Mr. Chamria and Mr. Poddar. Post preferential issue, RSHPL would hold 60% stake in the company.
The proposed capital infusion would be a positive for the group's capitalisation profile. The above transaction is subject to various regulatory approvals and CARE would continue to monitor the developments in this regard and will take a view on the ratings once the transaction is completed and impact on the credit risk profile of the company including future business strategy is clear,” company shared CARE Ratings rationale in a regulatory filing on Tuesday.
It further said that the ratings also factors in the consolidated profitability, lower borrowing cost with decrease in borrowing expenses and improving m-o-m trend in collection efficiency during 9MFY21. The ratings assigned to MFL continue to draw strength from Magma group’s long track record of operations, Experienced management team, wide branch network, geographically and product-wise diversified asset Portfolio, comfortable Capital Adequacy Ratio (CAR) and adequate liquidity profile.