A controlling stake in Magma Fincorp, the leading NBFC (Non-Banking Financial Company) will be acquired by Rising Sun Holdings, a company controlled by in the personal capacity of Serum Institute of India CEO Adar Poonawalla. The transaction will be done through a preferential issue of equity shares worth Rs 3456 Crores.
Recently Piramal group acquired crisis ridden Diwan Housing Finance Limited (DHFL) and Adar Poonawalla is the next industrialist to join the band wagon.
NBFCs are financial institutions which can be positioned between a full-fledged commercial bank and a category of borrowers, who are unable to obtain any funding from banks, for example small scale realty sector and businesses.
NBFCs have been thorough a roller coaster ride in the past after the collapse of IL&FS in 2018 and the mess at DHFL which followed. It took a period of over an year for the risk aversion to subside. This has affected the risk perception on these firms, thus leaving banks worried about their existing exposure to the sector.