Madura Micro Finance Ltd. (MMFL), an unlisted NBFC – MFI (Micro Finance Institution), is going to get amalgamated into Credit Access Grameen Ltd. (CAGL) a listed NBFC-MFI. It is going to be part cash – part stock deal, divided into 2-steps. Earlier, in 2018, MMFL was in advanced talks with Federal bank, a listed commercial banking company. Those talks fell through and now CAGL is all set to acquire 100% of MMFL.

Credit Access Grameen Ltd. (CAGL) formerly known as Grameen Koota Financial Services Pvt. Ltd is listed on the NSE and BSE with MCap of approx. Rs. 12,300 Crores. CAGL, founded by Vinatha Reddy and Suresh Krishna in 1999, offers a variety of financial products like Group Lending, Retail Finance and Insurance. It provides micro-credit loans to support business enterprises, home improvement, family welfare and emergencies. As a strategy, they mainly target women borrowers from rural and low-income households. As of September 2019, CAGL has 887 branches, spread across 13 states mainly Karnataka (269), Maharashtra(221), Tamil Nadu(131), Madhya Pradesh(115), and some more including Chhattisgarh, UP, Odisha, Bihar, Jharkhand, Rajasthan, Kerala.

CAGL is promoted by Credit Access Asia N.V., a company incorporated in Netherlands. This company holds around 80% stake in CAGL.

Madura Micro Finance Ltd. (MMFL) is an unlisted NBFC-MFI, incorporated in 2005 by Dr. K.M. Thiagrajan, which provides unsecured microfinance loans to women self-help groups (SHGs) in rural and semi-urban areas as well as to retailers with small shops. It mainly gives 2 types of loans: Group Loans and Individual Loans of amounts ranging from Rs. 15,000 to Rs. 65,000. MMFL was started in Tamil Nadu, it established a strong base there and over years MMFL has around 430 branches in various states like Maharashtra, Karnataka, Kerala, Bihar, Orissa and West Bengal.  MMFL also has a wholly-owned subsidiary called Madura Micro Education Ltd. (It is a very small company with total assets to the tune of Rs. 32 lacs).

Promoters have a major stake in MMFL (43%) while the rest is with the public and employee trusts. Dr. Tara Thiagrajan, daughter of the founder, has 32% stake.

The Transaction:

It is a 2-step transaction. The sellers in MMFL mainly are Dr. Tara Thiagarajan (promoter), AVT Group, Elevar Equity Mauritius and other minority shareholders.

1st Step – Cash Consideration for 76% Stake

  • CAGL proposes to acquire 76.34% of MMFL before filing the scheme. The scheme shall be filed and be effective only after this step.
  • CAGL will acquire this stake by cash. It will be a payment of roughly Rs. 662 crores(figure arrived at using valuation report).
  • Post this acquisition, MMFL will operate as an independent entity with existing management till the business processes are integrated and necessary approvals for the scheme is received.

Source: All figures from Reports and Results released by the Companies.

Madura-MicroFinance-Credit-Access-Gramin-Merger-1

2nd Step – Equity Swap for Merger

  • Once the scheme is effective, CAGL will issue new equity shares to the residual equity shareholders of MMFL (holding 23.66%).
  • For issuing equity share swap ratio being 158 shares of CAGL to be issued for every 100 shares held in MMFL.
  • The appointed date for the transaction is 2 March 2020.

Post the amalgamation whether the brand of MMFL will continue as it is or whether it will be merged with CAGL remains to be seen.

Shareholding Pattern

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