KKR, IFC in $97m Magma deal

The US buyout shop and the IFC have taken almost equal minority stakes in Bombay-listed non-banking finance company Magma Fincorp.

US private equity giant Kohlberg Kravis Roberts together with the International Finance Corporation (IFC) have invested INR4.4 billion (€69.2million; $97.4million) in Indian non-banking finance company Magma Fincorp, according to a statement.

Other financial terms were not disclosed in the statement, although the National Stock Exchange and Bombay Stock Exchange-listed company said in a filing to the bourse that it had issued 14.95 percent of the company’s equity share capital to an affiliate of KKR, and roughly the same amount to the IFC.

IFC’s investment is subject to the approval of the board of IFC, shareholders of Magma and relevant regulatory authorities, the statement noted. The capital infusion will be used to bolster Magma’s existing businesses and for the company to expand its presence.

“We believe that our partnership will help propel the growth in rural and semi urban segments by promoting consumer credit, agri lending and corporate lending to small and medium scale enterprises,” said Sanjay Nayar, head of KKR India.

Magma provides financial products including financing of vehicles, construction equipments, tractors and SME Loans.

Ernst and Young and Wadia Ghandy advised Magma on the transaction, while Ernst and Young, McKinsey and Co, Simpson Thacher and Bartlett, AZB Partners and Kotak Mahindra Capital advised KKR.

KKR has invested more than $1.1 billion in India since 2006. Its other Indian assets include 9 percent of Avantha Power and Infrastructure, which it paid $48.8 million for late last year and a stake in Dalmia Cement, which the firm backed with $166 million in mid 2010.

It also owns stakes in Aricent (earlier known as Flextronics Software Systems); Bharti Infratel, a telecom tower company; and Max India, a multi-business corporate providing healthcare and life insurance services.

IFC recently announced plans with an unnamed private equity fund to invest up to $40 million in a combination of equity and debt for an undisclosed stake in Haryana-headquartered Dunar Foods, a producer of basmati rice. The private investment arm of the World Bank has also backed several Indian funds such as microfinance investor Aavishkaar India Micro Venture Fund II and education-focused Kaizen Private Equity.