Private equity firm KKR has acquired around 9.95 per cent stake in Max Financial Services, the newly demerged entity of the Max Group that owns its life insurance arm, it said on Thursday.
The PE firm did not disclose the transaction value but shared that it acquired the shares from the promoters group led by Analjit Singh.
Stock market data shows the transaction was done for around Rs 950 crore ($138 million). The shares were picked for Rs 358 each. Max Financial shares ended the day at Rs 345.30, down 0.17 per cent on BSE in a strong Mumbai market on Thursday.
Promoters held 40.4 per cent stake in the company as of December 31, 2015, while other major shareholders include Goldman Sachs, Temasek, IFC and New York Life Insurance.
Post this transaction, the promoter stake has come down to a little over 30 per cent with KKR becoming the second largest institutional shareholder behind Goldman Sachs that owns around 15.5 per cent through two affiliates.
Max Financial holds 72 per cent stake in Max Life, India's fourth-largest private life insurer.
Sanjay Nayar, member and CEO of KKR India, said, "We continue to believe in India's growth potential, increase in financial savings and resultant life insurance industry growth. Within the sector we are excited to partner with Analjit Singh and his team at Max Financial Services, a company which is well positioned in the life insurance industry."
KKR invested from its Asian Fund II through the portfolio investment route.
Life insurance as a product category is significantly under-penetrated in India versus some of its Asian peers and India's increasing workforce, a rise in the country's median age and favourable savings trends are all expected to drive insurance growth, KKR said.
Analjit Singh said, "KKR has been a long-standing, value-added partner to Max Group across various business initiatives. The extension of our partnership couldn't have happened at a more opportune time than now, following the listing of Max Financial Services which creates an unparalleled platform to invest in the Indian life insurance space."
In the past, KKR has funded Max Group through the debt route.
JM Financial executed this trade on behalf of both parties.
As per the corporate restructuring first announced a year ago and now in the final leg, the Delhi-based diversified group recently completed the demerge of its business into three verticals—life insurance, health & allied businesses and manufacturing.
The flagship listed company Max India has been renamed as Max Financial and focuses solely on the group's flagship life insurance activity through its majority holding in Max Life. The second unit (Max India) now houses the investments in the health verticals, including hospital chain operator Max Healthcare, health insurance JV Max Bupa and Antara Senior Living. The third spin-off houses manufacturing subsidiary—Max Speciality Films and has been rechristened as Max Ventures and Industries Ltd (MVIL).
The firm had fixed January 28 as the record date for ascertaining the shareholders of Max India who would be allotted shares of the new companies that would be listed separately soon. These other entities are yet to be listed.
The group had shuffled its management last month.
While promoter Singh has taken the position of founder and chairman emeritus for the group as well as two of the resulting firms MFS and Max India, he remains chairman of MVIL.
Rahul Khosla, currently managing director of Max India, would retain his organisational hierarchy as the top non-promoter in the management. Khosla, who had joined the group in 2011 from Visa, will hold the newly formed position of president, Max Group.
Naina Lal Kidwai, who recently stepped down from HSBC India as chairperson, will join the group as chairperson of Max Financial.
The Max Group had a total customer base of 7.5 million, nearly 300 offices across India and 17,000 employees as of March 31, 2015.
While foreign partners in Indian insurance JVs have been actively restructuring their partnership with many raising their stake after the government hiked the FDI ceiling from 26 per cent to 49 per cent last year, investors have been equally attracted to the sector.
Late last year, ICICI Bank said it is selling 6 per cent stake in ICICI Prudential Life Insurance Company to PremjiInvest and Temasek for around Rs 1,950 crore ($297 million).
PremjiInvest, the private investment arm of Wipro chief Azim Premji, committed to buy a 4 per cent stake for Rs 1,300 crore ($197 million) in its single-biggest known bet on a company. Temasek was to pick a 2 per cent stake for Rs 650 crore (around $100 million) in what turned out to be the busiest year for the Singapore state investment firm.
In another deal, Fairfax Financial Holdings Ltd, the Canadian investment firm founded by India-born Prem Watsa, agreed to buy an additional 9 per cent stake in ICICI Lombard General Insurance Company Ltd from ICICI Bank Ltd in a deal worth Rs 1,550 crore ($237 million).