Shrachi Infra merger with Magma on the cards

Kolkata-based non-banking financial company (NBFC) Shrachi Infrastructure Finance (SIFL) is set to be merged with retail finance company Magma Leasing, making it one of the largest NBFCs in the country with an asset base of Rs 4,600 crore.

The share-swap ratio has been fixed at 1:3 "� one share of Magma Leasing for every three shares of SIFL "� and the merged entity will be called Magma Shrachi Finance.

Sanjay Chamria, managing director, Magma Leasing, said, "The boards of the two companies today approved the merger proposal. We will now proceed for necessary regulatory approvals."

The asset base of the merged entity will be more than Rs 4,600 crore and the combined earnings per share will be around Rs 6.80 for the quarter ended June 2006.

S K Todi, the chairman of SIFL, will join the board as vice-chairman of the merged entity and Ravi Todi, managing director, will join the board as executive director.

"From our side, the asset base will increase by 36 per cent while the equity capital will go up by 19 per cent following the merger," said Todi.

Promoters of Magma Leasing will be holding 42.8 per cent stake in Magma Shrachi Finance while the Todi group, the promoters of SIFL, will have 8.2 per cent stake. Overseas investors' holding will stand at 21.30 per cent.

The merged entity will have a pan-India presence with 146 branches spread over east, west, south and north India.

Chamria said the focus of the merged entity will continue to be rural and semi-rural market.

"We want to be the leader in rural financing," he said.

Meanwhile, the promoters and promoter group of companies of Shrachi will be allotted 3.29 lakh equity shares in Magma as non-compete fee.

The non-compete arrangement is valid for a period of six years.

KPMG conducted the due diligence and valuation was done by Ernst and Young.