On February 10, 2021, Magma Fincorp Ltd (Magma Fincorp) announced that Rising Sun Holdings Pvt Ltd (‘’Rising Sun Holdings”), a company controlled by Mr. Adar Poonawalla, and Magma Fincorp Ltd (“Magma Group”) are proposing to enter into a transaction for the acquisition of controlling stake in Magma Fincorp, the listed entity, through a preferential issue of equity shares. The preferential allotment is expected to be for an aggregate value of Rs 3,456 crore, subject to shareholders’ and other regulatory approvals wherein Magma Fincorp proposes to allot 45,80,00,000 shares to Rising Sun Holdings, and 3,57,14,286 shares to Mr. Sanjay Chamria and Mr. Mayank Poddar (existing promoters). Post the completion of transaction, Rising Sun Holding would hold 60.0% stake in the entity and the existing promoter group stake would get reduced to 13.3% from 24.4% currently. This is expected to increase the networth of Magma group to over Rs 6300 crore at consolidated level as compared to Rs 2858 crore as on December 31, 2020.

Following the preferential issue, Rising Sun Holdings would be classified as “Promoter” of Magma Fincorp. Magma Fincorp Ltd and its subsidiaries shall be renamed and rebranded under the brand name “Poonawalla Finance”, subject to regulatory approvals. Subsequent to the completion of the preferential allotment, the existing financial services business of Poonawalla Finance is proposed to be consolidated into Magma Fincorp. Rising Sun Holdings intends to nominate Mr. Adar Poonawalla as the Chairman of the Board of Directors and Mr. Abhay Bhutada, presently Managing Director & CEO of Poonawalla Finance, as Managing Director. Mr. Sanjay Chamria, current Chairman would continue as the Executive Vice Chairman of the Board.

CRISIL’s outstanding short-term rating of ‘CRISIL A1+' on the commercial paper of Magma Fincorp Limited and Magma Housing Finance Limited remain unaffected by this announcement. The proposed equity infusion is expected to strengthen the capital position of the group and may also help in lowering the incremental funding costs for the group. Nevertheless, on the business side, asset quality and earnings remain a key monitorables amidst the current environment. CRISIL Ratings will continue to track the progress on this transaction and engage with the Poonawalla management to understand their future business strategy and focus assets classes for the combined operations. The outstanding short-term rating reflects the group's diversified business risk profile with presence across retail financing asset classes, and adequate capitalisation. These strengths are partially offset by average asset quality and modest earnings profile.

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