Tag: capital

Magma HDI General Insurance approves capital raise of up to ₹250 crore via preferential issue

Banking & Finance

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Magma HDI General Insurance Company Ltd, the insurance JV of Magma Fincorp Ltd, has approved capital raise of up to ₹250 crore by way of preferential issue to third party investors. Pursuant to the above preferential allotment, the shareholding of the company will get reduced from the current 29.3 per cent to 24.2 per cent.

The fund-raising plan would be subject to requisite statutory and regulatory approvals.

As a part of the transaction, Magma HDI is looking to bring in funds managed by ICICI Venture and Morgan Stanley Private Equity Asia along with the Cyza Chem Pvt Ltd (a Poonawalla Group Company), and two family offices as new shareholders in the company. The transaction of ₹525 crore includes a primary capital raise of ₹250 crore.

“Fresh capital infusion of ₹250 crore will provide growth capital to meet the needs of the expanding distribution capabilities of the company. The secondary sale of ₹275 crore enables Magma Fincorp and its group companies in complying with the Reserve Bank of India’s guidelines for ownership of stake in insurance companies,” the company said in a press statement on Tuesday.

According to Rajive Kumaraswami, Managing Director & Chief Executive Officer, Magma HDI, the growth capital which the investors would bring on board would enable the company to expand the business and explore new opportunities.

“The insurance sector is poised to see exponential growth given the low penetration and the trigger of the pandemic which has led people to look at insurance as protection,” he said in the statement.

Referring to Magma HDI as a “young and fast-growing company”, Adar Poonawalla, Chief Executive Officer, Serum Institute of India, said that he was confident that it would reach its full potential in next few years.

“We are very excited with the ever-expanding opportunity in the BFSI space and with the capital infusion in Magma HDI by marquee investors and further increase by the Poonawalla group’s direct stake in the insurance arm, the company is well capitalised and poised for profitable growth and increasing its market share,” Abhay Bhutada, Managing Director & Chief Executive Officer, Poonawalla Finance, said.

Magma HDI has been clocking a CAGR of 45 per cent in the last three years. The company’s solvency stands at 1.81 times as on December 31, 2020, against the required regulatory solvency of 1.5 times. As of December 20, the investment book stands at a robust level of ₹2,881 crore.

Ambit Private Ltd is the exclusive financial advisor and Wadia Ghandy is the legal advisor to the transaction.

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PNB not to take part in PNB Housing Finance’s planned fund-raise

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Punjab National Bank (PNB) will not be participating in the capital-raise plans of its associate company PNB Housing Finance Limited (PNBHFL). However, despite the promoter PNB not participating, PNBHFL intends to continue to pursue with its proposed plan to raise ₹1,000 crore capital.

This decision by PNB is being seen in banking circles as a consequence of RBI not giving the go ahead to the bank’s application to infuse equity in PNBHFL.

“Punjab National Bank has communicated that it will not be participating in the capital-raise plans of the company. However, the company will continue to pursue with the proposed capital-raising plan through permitted modes,” PNBHFL said in a regulatory filing with the bourses.

PNBHFL has now said that it would look to raise capital of up to ₹1,000 crore through permitted modes including qualified institutional placement (QIP).

It maybe recalled that the Board of PNBHFL had, on August 19 last year, given the nod to the company to explore the possibility of raising capital (about ₹1,800 crore) through rights or preferential issue. Before that, PNB had approached the RBI for permission to infuse equity into the company.

In order to maintain optionality and timely injection of capital, the PNBHFL Board had last month (January 2021) approved the addition of the QIP mode in the capital-raise plan, in addition to rights and preferential issue. This was subject to PNB’s holding remaining above 27 per cent, with 26 per cent being minimum. PNB held 32.7 per cent stake in PNBHFL as on December 31, 2020.

As of end December 2020, PNBHFL’s capital to risk asset ratio (CRAR) based on IndAS stood at 20.06 per cent, of which Tier I capital was 17.42 per cent and Tier II capital was 2.64 per cent.

Earlier this month, PNB Managing Director and CEO Ch SS Mallikarjuna Rao had expressed confidence over getting RBI nod for infusing capital in its housing finance arm.

PNBHFL Managing Director & CEO Hardayal Prasad had, in an analyst call in January 2021, too expressed “hope” and “confidence” that PNB will get approval from the RBI for capital infusion.

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Yes Bank won’t dilute equity soon, BFSI News, ET BFSI

Banking & Finance

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Yes Bank will not be raising capital via equity soon and the recent board approval is only part of an enabling provision to reduce its time-to-market in future, the bank’s MD & CEO Prashant Kumar, said. He added that the bank’s deposits will cover its loan book by end-March despite growth in advances.

“We expect the credit-deposit ratio to be 100% by the end of March from 116% at the end of December,” Kumar said. He said that the bank’s strategy is to use its digital capability to grow retail deposits and loans. According to its December quarter results, the bank’s capital adequacy ratio is 19.6%, while common equity tier I capital is 13.1%, “We are well-capitalised but we decided to go through the process, which will also require a shareholder approval, so that we are in readiness,” said Kumar.

The private bank, which was revived by an RBI-initiated resolution process, had seen a third of its deposits being withdrawn by wary customers before the central bank placed a moratorium on withdrawals. Since then, deposits have bounced back growing 36% in the first nine months of the fiscal. The bank on Friday reported a profit of Rs 151 crore in the third quarter as against a loss of Rs 18,560 crore in the year-ago period.

The bank also said that it has received more information on accounts linked to whistleblower allegations. “All the loans are fully provided for and there will not be any financial implication even if any more loans are declared as fraud,” said Kumar. He said that Cox & Kings, which has been in the news for action by authorities, has already been declared a fraud.

The bank had earlier sought approval from the RBI for a ‘bad bank’ that will take over troubled loans and is awaiting a response from the regulator. While the bank has a Rs 1,000-crore exposure to DHFL, it does not expect any major recovery this year. “I do not expect the resolution will be implemented before March 31. Besides, we are unsecured lenders and don’t know how much we will get,” he said.

“Our focus is on retail and MSME. We have disbursed almost Rs 12,000 crore in the third quarter and this path would continue,” said Kumar. He said the bank was rationalising expenditure with operating expenses reduced by 13% and more branch mergers in the offing. The bank has already converted some of its rural branches into business correspondent centres. To augment fee-income, the bank has tied up with HDFC Life and SBI Life for distribution on the life insurance side and ICICI Lombard and SBI General on the non-life insurance side.



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