Krishna Capital Board Approves ₹87 Cr Deal for Control Change, Triggers Open Offer

Krishna Capital's Board has approved transactions set to infuse up to ₹87.08 crore, alongside a shift in company control and an open offer to shareholders. The company also faces risks related to PMLA non-compliance and requires upcoming shareholder approval for the deal.

Key Deal Details Announced

In a meeting on March 26, 2026, Krishna Capital & Securities Limited's Board of Directors sanctioned a significant strategic transaction. This includes a Share Purchase Agreement (SPA) and a preferential issue designed to raise substantial capital and alter the company's control.

The SPA allows for acquiring up to 42.87% of the company's stake for a maximum of ₹27.08 crore. Simultaneously, a preferential issue will allot 3 crore equity shares at ₹20 each, aiming to raise ₹60 crore. These actions require increasing the company's authorized share capital from ₹4 crore to ₹34 crore. Shareholder approval is sought at an Extra-Ordinary General Meeting (EGM) scheduled for April 25, 2026.

Impact of the Transactions

The combination of the acquisition and preferential issue signals a change in control for Krishna Capital, likely leading to a new board of directors. Per SEBI regulations, this change in control triggers a mandatory open offer to the company's public shareholders. The capital infusion is intended to strengthen the company's financial position and support future growth, though the process involves significant regulatory and shareholder approvals.

Company Background

Krishna Capital & Securities Limited operates as a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India (RBI). Its business focuses on lending and securities trading. The Ahmedabad-based company has previously explored capital raising, with its board set to discuss capital hikes and private placements in late March 2026, indicating ongoing strategic financial planning.

Immediate Changes Expected

• New Ownership: A new group of acquirers will hold a substantial stake, potentially controlling up to 42.87%.
• Board Reconstitution: The Board of Directors is expected to be reshaped to reflect the new controlling shareholders.
• Open Offer Triggered: Public shareholders will have the opportunity to tender their shares through a mandatory open offer, following SEBI takeover regulations.
• Capital Infusion: The company will receive significant funds, enhancing its financial capacity for operations and expansion.
• Shareholding Structure: The overall shareholding pattern will see a considerable alteration.

Potential Risks and Challenges

• Regulatory Approvals: The SPA and preferential issue are contingent upon securing all necessary statutory and regulatory clearances.
• Shareholder Approval: The transactions require approval from shareholders at the EGM on April 25, 2026.
• Dilution: The preferential issue priced at ₹20 per share, though a premium to current market prices, will result in dilution for existing shareholders.
• PMLA Non-Compliance: Krishna Capital & Securities Ltd. has been identified as a 'High Risk Financial Institution' by FIU-IND due to PMLA rule non-compliance. This highlights potential governance and compliance issues that could attract further scrutiny.

Market Context

Krishna Capital operates in the competitive NBFC and financial services sector, alongside major players such as Bajaj Finance Limited, Shriram Finance Limited, Cholamandalam Investment and Finance Company Limited, and Jio Financial Services Limited. These peers typically feature larger operations and greater diversification.

Transaction Metrics

• Authorized share capital will increase from ₹4 crore to ₹34 crore (FY26).
• The Share Purchase Agreement allows for acquiring up to 42.87% stake for a maximum of ₹27.08 crore (FY26).
• A preferential issue of up to 3 crore shares at ₹20 per share is planned to raise a maximum of ₹60 crore (FY26).

What to Watch For

• EGM Outcome: The shareholders' decision on the proposed transactions during the EGM on April 25, 2026.
• Regulatory Approvals: Confirmation of necessary statutory and regulatory sanctions for the SPA and preferential issue.
• Open Offer Process: The commencement and completion of the open offer to public shareholders.
• Board Composition: The announcement of the new board of directors following the change of control.
• Fund Utilization: Details on how the newly raised capital will be deployed.
• Compliance Status: Any further developments regarding the PMLA non-compliance noted by FIU-IND.