CARE Ratings has upgraded its rating and outlook on Poonawalla Fincorp instruments. The credit rating agency has upgraded the rating of various long-term bank facilities/instruments of Poonawalla Fincorp [PFL; erstwhile Magma Fincorp), to 'CARE AA+; Stable’ from 'CARE AA- (under credit watch with developing implications)’ and reaffirmed the short-term rating at 'CARE A1+'.

"The revision in the ratings assigned to PFL factors in the strength derived from the new promoter i.e., Poonawalla Group acquiring 60% stake through Rising Sun Holdings (RSHPL) accompanied with a change in management control with Adar Poonawalla appointed as the Chairman of the Board, shared brand name and expectation of timely need based financial support from the Group," company said on Thursday.

The company added, the ratings also factor in significant infusion of equity capital (Rs 34.56 billion in May 2021) resulting in comfortable CAR, low leverage, and comfortable liquidity profile of PFL on a consolidated basis. Induction of professional management, revised product focus towards better quality borrowers, and reduction in cost of funds are also key drivers for rating revision. The ratings continue to draw strength from PFL’s long track record of operations and wide branch network.

CARE had earlier placed the ratings assigned to long-term instruments/facilities of PFL on ‘Credit Watch with Developing Implications’ following the announcement of fresh infusion of Rs 34.56 billion by way of preferential issue of equity shares of PFL. The equity was infused by new promoters RSHPL for Rs 32.06 billion and existing promoters for Rs 2.50 billion.

Post the completion of this sizeable preferential issue, regulatory approvals & open offer, RSHPL holds 60% stake while the existing promoters’ stake reduced to 13.3% from 24.4% in PFL. Following the preferential issue, RSHPL is classified as the promoter of PFL along with existing promoters. Further, PFL and the subsidiaries, namely Poonawalla Housing Finance (PHFL) (erstwhile Magma Housing Finance (MHFL)) have been renamed and rebranded under the brand name ‘Poonawalla Fincorp, with effect from July 22, 2021. The acquisition of PFL shall be of strategic importance of the financial services business to the Group. The Poonawalla Group is one of the leading players in the Pharmaceuticals & Biotechnology segment.

Shares of the company gained Rs 3.60, or 2.03%, to settle  at  Rs 180.55.  The total volume of shares traded  was  203,410 at  the BSE (Thursday).