34725 - Magma NCD

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Summary of Investment Information

Project Number

34725

Company Name

POONAWALLA FINCORP LIMITED

Date SPI Disclosed

Feb 17, 2014

Country

India

Region

South Asia

Projected Board Date

Mar 19, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Aug 19, 2021

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Apr 14, 2014
Signed : Jun 20, 2014
Invested : Jun 30, 2014

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

Magma Fincorp Limited (“Magma” or “the Company”) is one of the top 20 NBFCs in India, with presence in 21 Indian states with total of 280 branches primarily targeting the semi-urban and rural markets. Magma has a portfolio volume of INR 172.2 billion (US$2.8bn) as of December 31, 2013. The Company plans to utilize the funds raised through issuance of NCDs to augment its capital adequacy, continue to focus on penetration in low income states, especially targeting customers with lower incomes by financing smaller assets with smaller ticket sizes.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	35.85
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Quasi-Equity	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

Demonstration effect: In the current market environment, the proposed investment would encourage other institutional investors to consider investment in the Indian corporate debt market.

Additional Reach: Magma has an outstanding portfolio volume of US$2.8 billion spread across more than 400,000 customers as of December 13. The investment is expected to reach around 700,000 customers between FY14-19. IFC''s support would also help Magma in scaling-up operations in several LIS.

Long term partner: IFC is an equity investor in Magma. At a time when there is significant stress in the economy, impacting the CV sector, IFC''s continued support to Magma through the long term bond, will demonstrate IFC''s continued confidence in Magma, a company focused towards financing at the base of the pyramid, with a significant portion of their assets being in the low income states. This will also reinforce the sustainability of financing MSMEs in LIS to other market players.

Capital augmentation & Funding diversification: Magma needs to infuse capital to enable asset growth in the near term. IFC''s investment through the Tier II instrument would support the company by strengthening its capital base, especially at a time when raising fresh equity from capital markets would be a significant challenge due to depressed valuations and a downturn in the economy.

Most NBFCs are reliant to a large extent on Bank borrowings. IFC''s investment would allow Magma to meet its funding requirements from a diversified source and assist in the reducing reliance on bank borrowings.

Stamp of approval: IFC''s debt support to Magma will help attract other FIIs as takers of its corporate debt. The continued IFC support through subordinate debt will send a clear signal to the market on IFC''s continued confidence in the Company.

E&S Category Rationale / Risks and Mitigation

Task Title & Description	Status	Comments	Completion Date
Establish SEMS	Completed	Board approved version sent to IFC	11/02/2018
Staff Training	Completed	New ESMS officer completed training	07/05/2019
Other1 Upgrade occupational health & safety policy and procedures	Completed	policy submitted	01/21/2019

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