PE-backed NBFC Magma to apply for India banking license
Non-bank financing company (NBFC) Magma Fincorp, which has several private equity investors, will apply to the Reserve Bank of India (RBI) for a new banking license. IDFC, Religare Enterprises, Reliance Capital and the Aditya Birla Group also plan to submit applications ahead of the July 1 deadline.
The RBI has specified a minimum capital requirement of INR5 billion ($82 million) to start a bank. Unlike NBFCs, banks have to comply with cash reserve ratio and statutory liquidity ratio requirements, which new applicants will have to meet from the outset.
As of March, Magma had total loan assets of INR162.4 billion under management. It provides financing for purchases of vehicles and construction equipment as well as industry loans and general insurance, mainly serving in rural and semi-rural areas. The company launched its housing finance business with a takeover of General Electric's mortgage business earlier this year.
The RBI has proposed an 18-month window from the date of in-principle approval to commence banking operations.
PE investors in Magma include Chryscapital, KKR, the International Finance Corporation and Macquarie. Investment in standard Indian banks is capped at 5%. Chryscapital currently holds 7.73% through Lavender Investments and KKR 16.07%
Earlier this month, CLSA exited its 2.59% stake in the nbfc by selling its shares to Goldman Sachs. As of March, CLSA held 4.9 million shares in Magma, which it sold for INR92.75 apiece for a total consideration of INR456 million ($7.5 million)
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