Axis Bank is set to acquire nearly 30% of Max Life Insurance Co. from Max Financial Services Ltd, the flagship listed company of Analjit Singh, for ₹1,600 crore, two people familiar with the development told ET.
India’s fourth-largest private sector bank will become a strategic partner of the life insurance firm, in which Max Financial will eventually hold 70% after a two-stage transaction.
“In the secondary share sale transaction, Max Financial Services Ltd will divest 28.6% stake in Max Life Insurance for about ₹1,600 crore to Axis Bank,” said one of the persons on condition of anonymity as the deal has yet to be presented to the company boards. The transaction is priced at book value, he added.
Under the deal, likely to be announced shortly, Axis Bank will also have three to four nominees on the board of Max Life Insurance Co., said the second person. Both sides had signed an exclusivity and confidentiality agreement in February 2020. Axis Bank, which currently owns a little less than 2% of Max Life Insurance, will increase its stake subject to regulatory approvals.
“We are under a confidentiality agreement and will not be in a position to comment,” a Max Group spokesperson said. An Axis Bank spokesperson did not respond to queries.
Max Financial restructured the shareholding of Max Life in March 2020.
Bancassurance Partnership
Under that scheme, Mitsui Sumitomo Insurance swapped 20.57% of its stake in Max Life Insurance for a 20.87% stake in Max Financial in a cash-less transaction. Max Financial has the option to buy back the remaining 5% stake that Mitsui Sumitomo holds in Max Life Insurance, which it will do so for ₹804 crore with part of the proceeds from the share sale to Axis Bank, the sources said.
The deal will put Axis Bank in the league of other leading private and public sector lenders such as HDFC Group, ICICI Bank, Kotak Mahindra Bank and State Bank of India that have significant stakes in life insurance companies. The transaction will be subject to approval by the central bank, the Competition Commission of India and the market and insurance regulators.
“The transaction is changing the nature of involvement of Axis Bank with Max Life Insurance from a pure-play bancassurance partner to a significant equity shareholder and joint venture partner that will allay the overhang of uncertainty of long-term bancassurance partnership for Max Life Insurance,” said the second person cited above.
Max Life is currently the largest non-bank-owned private life insurer in India with an embedded value of ₹10,077 crore and is trading at much lower multiples than peers such as SBI Life, HDFC Life and ICICI Life, he added.
At the time of the exclusivity agreement with Max Group, Axis Bank MD Amitabh Chaudhry had said, “The successful completion of the proposed transaction is expected to create significant value for all stakeholders.”
For Max Life, in the first nine months of FY2020, the proprietary and bancassurance channels demonstrated strong growth of 22% and 20%, respectively. The value of new business during the first nine months of FY20 was ₹576 crore, up 24% over the year-earlier period. Total first-year premium increased 19% to ₹3,693 crore. Renewal premiums rose 11% to ₹6,618 crore.
Source: Economic Times