New Delhi: Axis Bank has decided to raise its stake in Max Group promoted Max Life Insurance to 30 per cent, a development which values the insurer at over Rs 5,000 crore. With the deal going through, sources said, the bank is expected to pay Rs 1,600 crore to Max Financial Services (MFS), the holding company of Max Life.
Axis Bank holds about 1 per cent stake in Max Life and is the biggest banking channel partner for distribution of its products. Products sold through the bank reportedly contribute for 54 per cent of Max Life’s revenues. The boards of Axis Bank, MFS and Max Life approved the transaction late on April 27, a joint statement said on Tuesday.
“This is an outcome of the inter-se discussions after the three companies had signed a confidentiality and exclusivity arrangement on February 20, 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life,” it said.
Interestingly, the deal comes at a time when the economy is hit by COVID-19 crisis impacting all sectors of the economy including the financial sector. It is to be seen how the sectoral regulators including the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI) deal with the proposed transaction in these difficult times.
MFS holds 72.5 per cent stake in Max Life and Japan-based Mitsui Sumitomo Insurance (MSI) owns 25.5 per cent stake. The joint venture arrangement will significantly improve Max Life’s position vis-a-vis its competitors, including the other large banks owned life insurers, it said.
“The development will result in a mutually beneficial and enduring relationship between Axis Bank and Max Life and bring the stability of a long term partnership to India’s fourth largest private life insurance franchise,” it said.
The proposed transaction with Axis Bank follows the ongoing swapping by MSI of 20.6 per cent stake that it holds in Max Life with a 21.9 per cent stake in MFS, it added. “MFS also plans to purchase MSI’s balance stake in Max Life. Post completion of the series of transactions, Max Life will become a 70:30 joint venture between MFS and Axis Bank” the statement said.
The proposed transactions are subject to approval of requisite corporate and regulatory authorities including IRDAI, RBI and the Competition Commission of India, it added.
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