PETALING JAYA, 15 April 2021: Paramount Corporation Berhad (Paramount) today announced that its wholly owned subsidiary Magna Intelligent Sdn Bhd (MISB) is investing in a peer-to-peer (P2P) financing platform as its entry point into the fintech sector. MISB signed a conditional share subscription agreement with P2P Venture Sdn Bhd (P2P Venture) and Omegaxis Sdn Bhd (Omegaxis) for a 30% equity interest in Omegaxis at a total cash consideration of RM13.7 million.
Omegaxis is a special purpose vehicle set up to facilitate Paramount’s proposed investment in P2P financing platforms in collaboration with P2P Venture with a 30:70 ownership structure.
Paramount’s proposed investment is in line with its 5-year (2020-2024) strategic plan to identify new sources of earnings, particularly those in the digital space, after the divestment of its education business. Venturing into digital space is to future proof the Paramount group for long term sustainability. In this respect, Paramount, through MISB, has also invested in Openlearning Limited, an Australian edutech which operates an online education platform for tertiary education institutions, and is now listed on the Australian Securities Exchange.
The proposed investment will also serve as strategic alliance to pave the way for other business opportunities in the digital space, including applying to Bank Negara Malaysia for a digital banking licence that Paramount is exploring.
Upon the completion of the transaction, Omegaxis will have a 63.5% equity interest in Peoplender Sdn Bhd (Peoplender), whose subsidiary Fundaztic SG Pte Ltd (Fundaztic Singapore) has received approval from the Monetary Authority of Singapore to operate a P2P financing platform in Singapore but has yet to launch.
Peoplender is a Recognised Market Operator registered with the Securities Commission Malaysia which operates Fundaztic, an electronic P2P financing platform launched in 2017 for start-ups and micro to small and medium enterprises (MSME) to procure financing for their working capital by way of issuing investment notes to investors. In July 2020, Fundaztic was also the first P2P platform in Malaysia to launch a secondary market.
To expand its market, Fundaztic has partnered with imSME, an online SME financing/loan referral platform that is managed by Credit Guarantee Corporation Malaysia Berhad and supported by Bank Negara Malaysia. It has also partnered with Lazada to deliver interest-free financing to Lazada merchants under the Malaysian Government’s ePenjana initiative for MSMEs amidst the COVID-19 pandemic. Fundaztic has also participated in the eBerkat Marketplace, a one-stop online platform launched by Malaysia Digital Economy Corporation offering financial services to the underserved B40 community and MSMEs.
The proposed investment is expected to benefit from the tremendous room for the P2P financing industry to cater to the financing needs of Malaysian SMEs. Currently, financial institutions are the dominant source of financing for SMEs, with RM161.03 billion disbursed as at August 2020 while the P2P financing industry only financed RM418.6 million in 2019 and RM289.5 million up to September 2020.
In addition, a stronger appetite from investors who seek higher returns in a low interest rate environment, and growing acceptance of P2P financing as an alternative financing and investment source in Malaysia bode well for the P2P financing industry in Malaysia.
As the business model of Fundaztic can be replicated in other P2P financing operators, Omegaxis will be able to expand regionally in the future.
The proposed investment is a related party transaction in which the executive directors of Paramount have interest but have abstained from all deliberation and voting on the matter at the board meetings of Paramount and MISB.
The proposed investment is expected to be completed by the end of 2Q2021 after receiving the relevant approvals.