Billionaire Analjit Singh-controlled diversified firm Max India is splitting into three companies with the existing firm becoming India's first listed company with insurance as the sole business, it said in a stock market disclosure.
The other two demerged units will house healthcare & health insurance arms and the specialty films manufacturing business, respectively.
Max India is engaged in the business of life and health insurance, clinical research, healthcare services and manufacturing specialty films. Recently, the firm had said it is looking at a corporate restructuring.
Meanwhile, the firm has also received its board approval for divestment of its clinical research business Max Neeman Medical International (MNMI) in India and the US to Canadian contract research organisation (CRO), JSS Medical Research India for $1.5 million (Rs 9.5 crore). The deal which is subject to due diligence, is expected to close by mid-February 2015.
MNMI, a contract research company, provides clinical development services to small, mid-size and global pharmaceutical, biotech and medical device companies.
The company will demerge into three business verticals—life insurance, health & allied businesses and manufacturing. The appointment date of the demerger is April 1, 2015 and it is expected to be completed in the next 6-9 months.
Post demerger, Max India will be renamed as Max Financial Services Ltd (MFS) which will focus solely on the group's flagship life insurance activity through its majority holding in Max Life. In April 2012, Japanese insurance company Mitsui Sumitomo Insurance bought out US-based New York Life's 26 per cent stake in Max New York Life Insurance for Rs 2,731 crore. Post this, the firm was rebranded as Max Life.
During FY14 Max Life Insurance ranked fourth among private life insurers with a market share of 10.3 per cent. For the year ended March 31, 2014 it had gross written premium of Rs 7,279 crore and PAT of Rs 436 crore. As on March 31, 2014, it had assets under management of Rs 24,716 crore.
The second unit will house the investments in the health verticals including hospital chain operator Max Healthcare, health insurance JV Max Bupa and Antara Senior Living.
Last July, South African hospital chain Life Healthcare decided to increase its stake in Max Healthcare to 46.5 per cent from 26 per cent for up to Rs 794 crore ($132 million). At this price, the hospital chain was being valued at about Rs 4,000 crore and the Max India's stake at around Rs 1,800 crore. IFC is another investor in this hospital firm.
Private health insurer Max Bupa is a 74:26 joint venture between Max India and UK's Bupa. Bupa recently said it is keen to increase its stake in the JV to 49 per cent. After the Insurance Laws Amendment Ordinance 2014 was passed recently, foreign investment ceiling was increased to 49 per cent in the insurance sector. This marks the first formal statement post the ordinance where the foreign partner has said it is raising its holding.
The third spin-off of Max India will focus on the group's manufacturing subsidiary—Max Speciality Films. It will be rechristened as Max Ventures and Industries Ltd (MVIL).
Under the proposed restructuring, Max India's shareholders will retain one equity share of Rs 2 in MFS and will additionally get one equity share of Rs 2 each of Max India (new) for every one equity share of Rs 2 each held in the existing listed firm. They will also get one equity share of Rs 10 each of MVIL for every five equity shares of Rs 2 each held in the existing company.
As of December 31, 2014, the diversified firm has cash reserves of Rs 605 crore. It is proposed to split the cash between the three listed companies. Of this, MFS (insurance unit) will hold Rs 150 crore, Rs 10 crore will be with MVIL (specialty films) and the remaining Rs 445 crore will be with the newly formed healthcare business under Max India.
"This demerger will provide investors with a choice to continue to be associated with all these businesses, or only specifically invest in the set of businesses that suit their respective investment philosophy," said Analjit Singh.
Max India counts among its existing shareholders Goldman Sachs, Temasek and IFC which would hold shares of each of the three firms, post demerger.
Max India scrip closed at Rs 492.75 each, up 8.40 per cent on BSE in a strong Mumbai market on Tuesday.
Analjit Singh to hike stake in demerged specialty films unit
Analjit Singh has also made a voluntary open offer for buying up to an additional 34.5 per cent stake in Max Ventures and Industries Ltd (MVIL) which will be listed post Max India demerger and will hold the investment in Max Speciality Films.
This will be formally made upon completion of demerger and listing of MVIL at valuation of around Rs 168 crore for 100 per cent of the company.
Currently Singh, as promoter of Max India, owns around 40.5 per cent of the listed flagship. Post demerger he would be holding same stake in all the three firms. However, depending on the acceptance ratio of the open offer, he may hold as much as 75 per cent in the specialty films company, the smallest of the three businesses. Public listing norms prescribe a ceiling of 75 per cent on promoter's holding in a listed company.
The top management people including Analjit Singh, chairman; Rahul Khosla, MD; and Mohit Talwar, deputy MD, will continue to hold their roles in the demerged ventures of the group.
Other top leaders in operating companies will also continue to have their roles. These people include Rajesh Sud, MD & CEO of Max Life and chairman of Max Bupa; Rajit Mehta, deputy MD of Max Healthcare; Tara Singh Vachani (daughter of Analjit Singh), CEO of Antara; Jaideep Wadhwa, CEO of MFS and Mohini Daljeet Singh, chief executive of Max India Foundation.
The corporate management team will manage a shared services centre, which will provide functional support to all three verticals.
(Edited by Joby Puthuparampil Johnson)