facebook-page-view
Advertisement

Axis Bank again tweaks pact to acquire Max Life Insurance stake

By TEAM VCC

  • 30 Oct 2020
Axis Bank again tweaks pact to acquire Max Life Insurance stake
Credit: VCCircle

Private-sector lender Axis Bank has changed for a second time its plan to acquire a stake in Max Life Insurance Company Ltd in a bid to secure regulatory approvals for the deal.

Axis Bank said in a stock-exchange filing Friday that the lender and its units will sign a revised agreement with Max Financial Services Ltd to acquire a stake of 19.002% stake in Max Life.

The bank will itself initially buy 9.002% of Max Life while Axis Capital Ltd and Axis Securities Ltd will purchase up to 3%. The two units will also have the right to acquire another 7% stake in the insurer.

Advertisement

The deal is being revised after the Reserve Bank of India rejected Axis Bank’s application for approval and advised it to tweak the pact, the private-sector lender said.

Axis Bank had in April decided to buy a 29% stake in Max Life but reduced the size of the stake to 17% in August after objections from the insurance regulator.

Axis Bank had first invested in Max Life a decade ago. Its plan to take a bigger stake in the insurer was aimed at beefing up its presence in the insurance industry.

Advertisement

Max Financial currently holds a 72.5% stake in Max Life while Japan’s Mitsui Sumitomo Insurance owns 25.5%. The Japanese company would swap its stake in the insurer with a stake in Max Financial.

As per the deal originally announced in April, Max Financial was to own 70% of the insurer after the transaction was completed.

As per the original deal, Max Financial and Axis Bank had agreed to list Max Life in a few years’ time through a merger with Max Financial. If this couldn’t go through, then Axis Bank’s stake in Max Life would be swapped with a stake in Max Financial. In case the first two options were not consummated within 63 months from the closing of the deal, Axis Bank had a put option to sell all shares in Max Life at Rs 294 apiece apiece.

Advertisement

It isn’t clear if the revised deal changes the put option that would give a huge upside to Axis Bank.

Max Life is the largest non-bank life insurance company in India and the fourth-largest in the Indian private sector overall. However, not having a bank promoter has not been revenue-positive for the firm as banks have overtaken insurers as the biggest distributors for policies.

Advertisement

Share article on

Advertisement
Advertisement