Private lender Axis Bank Ltd on Friday said that it will acquire up to 19% in Max Life Insurance Co. Ltd. through various Axis entities since the Reserve Bank of India has turned down the bank’s earlier proposal to directly buy a stake of 17% in the life insurer.
On 24 August, Axis bank had said it would buy up to 17% instead of its original plan to buy up to 29% in Max Life for about ₹1,600 crore.
Axis Bank had sought RBI’s approval to do so.
In response to Axis Bank’s August application to the Reserve Bank of India for directly acquiring 17% in Max Life, RBI “has advised Axis Bank that the application for direct acquisition of 17% has not been considered”.
“The bank has been advised to be guided by Para 5(b) of Master Direction- Reserve Bank of India (Financial Services provided by Banks) Directions, 2016 dated as updated from time to time,” said the bank in a statement.
Accordingly, three Axis entities will acquire total stakes of 19% in Max Life.
As per the revised agreements, Axis Bank will acquire up to 9% stake in Max Life.
Axis Capital Ltd. and Axis Securities Ltd will together acquire up to 3% in Max Life.
In addition, Axis Entities will have a right to acquire an additional stake of upto 7% of Max Life, in one or more tranches, said Axis Bank.
RBI is typically not in favour of any bank parting with its capital for any business other than core banking business to avoid spillover risks.
On 24 August, Axis Bank and Max Financial had revised the terms of their proposed joint venture pact involving the latter’s life insurance venture after regulatory interventions.
Both RBI and the Insurance Regulatory and Development Authority of India or Irdai had raised queries over several terms of the proposed JV.
On 3 September, Mint reported that Irdai had sought a clarification on the valuation of the deal since the shares of Max Life have been valued at just Rs. 28.16 in the month of April, while the same shares of Max Life were valued at Rs. 108 apiece in a deal in March between Mitsui Sumitomo Insurance and Max Financial Services Ltd., the holding company of Max Life.
Irdai had also sought clarification from Max Life and Axis Bank about some key clauses with regards to the deal’s compliance with laws, regulations and from a governance point of view.
