Analjit Singh, the founding promoter of Max group, is in talks to sell a 10% stake in Max Financial Services Ltd, the holding company for Max Life Insurance Ltd, to raise as much as Rs 1,200 crore. Hero Corp, the flagship company of Sunil Kant Munjal, is among the frontrunners to pick up the stake.
Max Financial Services will also consolidate its stake in Max Life Insurance to over 97% from 71.79% currently through a share swap with Japan’s Mitsui Sumitomo Insurance Co. Ltd., the insurer’s joint venture partner.
Mitsui Sumitomo will exchange its 26.12% stake in Max Life Insurance for a 21.45% holding in Max Financial Services and cash of about Rs 815 crore. Mitsui Sumitomo will become a public shareholder in Max Financial Services and exit as joint venture partner in the insurance company.
The proposed fund raising by the promoters is aimed at deleveraging, people familiar with the plan said.
“The promoters of Max Financial Services have pledged about 80% of their current ownership of around 28.3%, which is one of the major factors that affect its share price,” said one person.
A promoter representative declined to comment on the matter. An email query sent to Sunil Kant Munjal was unanswered.
Max Financial Services shares gained 5.1% to Rs 439.70 at the close on the BSE on Tuesday, giving the company a market capitalisation of Rs 11,845.46 crore.
The proposed equity restructuring of Max Life Insurance is aimed at transferring the entire ownership to the holding company to better reflect the shareholder value of the insurance company.
“Since Mitsui is getting equity stake in the listed holding company, it will facilitate its exit,” the second person said.
The swap is conditional on Mitsui being issued a minimum of 73.5 million equity shares of Max Financial, constituting 21.45% of the post-issue share capital of the company, in consideration of the transfer of the Japanese company’s equity shares of Max Life.
Mitsui will get about Rs 815 crore as cash for a 5.24% stake when either partner decides to exercise their buy or sell options. The remaining 19.98% will be swapped for equity in Max Financial Services.
Following the issue of preference equity shares to Mitsui, Analjit Singh and his family’s stake will come down to 22.25%.
“Under the agreement, Analjit Singh and his family need to retain a minimum 10% stake to remain promoter of Max Financial Services,” said one person. After the proposed 10% stake sale, the promoters’ stake in Max Financial will be about 12%.
Max Financial Services and Max Life Insurance had entered into an agreement for a three-way merger with HDFC Life in June 2016. However, the deal was vetoed by the regulator a year later.
Earlier this year, Max group was reportedly in discussions with Axis BankNSE -0.51 % for a possible acquisition or merger of Max Financial Services. However, no agreement could be reached on valuation, a person aware of the matter said.
