ICICI Venture, Morgan Stanley Private Equity Asia, Cyza Chem Pvt Ltd, a Poonawalla group company, and two other family offices are putting in Rs 525 crore in Magma HDI General Insurance, a joint venture between Magma Fincorp Limited and HDI Global SE, Germany.
Of the Rs 525 crore, the fresh capital infusion will be to the tune of Rs 250 crore in the company, which will provide growth capital to meet the needs of expanding distribution capabilities of the company. The existing Magma group entities have done a secondary sale, which is to the tune of Rs 275 crore. The amount will allow the promoter Magma Fincorp and its group companies to comply with the Reserve Bank of India’s guidelines for ownership of a stake in insurance companies.
The transaction is, however, subject to shareholder approval, regulatory approval, and approval from Competition Commission of India. Post consummation of the transaction, ICICI Venture will hold 16.76 per cent stake in the company, Morgan Stanley Private Equity Asia will hold 9.9 per cent, and the two family offices will hold 2 per cent each.
Serum Institute is already a current shareholder in the company, holding 9.9 per cent stake. Post the transaction, Serum Institute along with Cyza Chem hold around 14 per cent stake in the company.
When Magma group entities started the joint venture, they held 74 per cent stake in the company and HDI was holding 26 per cent. But, according to RBI approval, the stake of Magma had to be brought down to 50 per cent. So, by virtue of the primary and secondary sale, Magma, Serum, and Cyzaa will end up holding 50 per cent of the company.
Nirav Mehta, Managing Director of Morgan Stanley Private Equity Asia, said, “The general insurance sector in India is poised for a structural growth phase, and we believe that Magma HDI is well-placed to tap this opportunity given its management strength, careful product selection, prudent underwriting, and distribution network”.
“We are excited about the prospects offered by the under-penetrated Indian insurance sector”, said Puneet Nanda, Managing Director & Chief Executive Officer, ICICI Venture.
Upto the month of February, the private sector general insurance company has earned premiums to the tune of Rs 1,164.74 crore, up 2.11 per cent from Rs 1,140.66 crore during the same period last year. It has a market share of 0.65 per cent in the non-life insurance space.
The company caters to both retail and corporate clients. For retail customers, it offers an array of products such as motor, health, individual personal accident and home. And, for corporates, it offers products such as property, fire, marine cargo, and liability insurance.
Abhay Bhutada, MD & CEO, Poonawalla Finance said, “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.”
According to the company, it has 133 branches, with over 1,000 employees and has serviced over 40 lakh customers till date.
“The growth capital which the investors bring on board will enable us 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”, said Rajive Kumaraswami, MD &CEO, Magma HDI General Insurance. Our focus going forward will be the motor, health, and commercial business, he said.
A month ago, Adar Poonawalla-controlled Rising Sun Holdings said it will acquire a 60 per cent stake in non-banking financial company (NBFC) Magma Fincorp by subscribing to a Rs 3,456-crore preferential issue, post which Magma and its subsidiaries will be renamed and rebranded Poonawalla Finance.
Poonawalla Finance is an existing finance company owned by the Poonawalla family, which owns and controls Serum Institute of India. Recently, shareholders of Magma Fincorp at an extraordinary general meeting approved the allotment of preferential shares to Rising Sun Holdings Private Limited. Following the preferential issue, Rising Sun Holdings would be classified as “promoter” of Magma Fincorp.