Axis Bank Signs Deal To Hold 30% Stake In Max Life Insurance
Axis Bank Ltd. has signed a definitive agreement to hold a 30 percent stake in Max Life Insurance Company Ltd., as a way to strengthen its position in the life insurance sector.
The private lender and Max Financial Services Ltd. have signed definitive agreements to become joint venture partners in Max Life, according to the bank’s notification to the exchanges on Tuesday. On conclusion of the deal, Axis Bank will hold a 30 percent stake in Max Life, while Max Financial Services will hold 70 percent.
As per the disclosures, Axis Bank will acquire 55.64 crore shares representing 29% stake in Max Life in cash. The lender has not disclosed the acquisition price for the shares.
Max Financial Services currently holds a 72.5 percent stake in Max Life and Mitsui Sumitomo Insurance owns 25.5 percent. The Japan-based firm is in the process of swapping a 20.6 percent stake in Max Life for a 21.9 percent stake in Max Financial Services.
Max Financial Services also plans to purchase Mitsui’s balance stake in Max Life.
“Axis Bank and Max Financial Services intend to create long-term value for all shareholders of Max Life by working towards a merger of the Max Financial Services with Max Life,” the disclosures showed.
Should the merger not be completed by a pre-agreed timeline, the parties have agreed on certain outcomes. This includes the right to “swap up Axis Bank’s shareholding to Max Financial, tax consequence of which will be equally borne by the parties.”
Further, if the Axis-Max deal is not consummated within 63 months from the closing, the transactions provide for a put option for Axis Bank to sell all shares in Max Life at a price of Rs 294 per share within nine months of exercise of such put option.
The Insurance Play
With the Axis-Max deal, the private bank hopes to get a stronger foothold in the life insurance sector. While competing lenders like ICICI Bank Ltd. have subsidiaries in the insurance sector, Axis Bank does not.
“We continue to believe in the long-term prospects of India’s under-penetrated life insurance space, current environment notwithstanding,” said Amitabh Chaudhury, chief executive officer of Axis Bank, in a press release.
Max Life had a turnover of Rs 19,987 crore in 2019, as per the bank’s disclosures.
The two companies had a bancassurance partnership until now. “The two companies have had a successful business relationship for over a decade, providing long-term saving and protection products to over 19 lakh customers. The total premium generated through this relationship has aggregated to over Rs 38,000 crore,” the release said.
Following this deal, the bank will hold a 30 percent stake in the insurance company and have the right to nominate three directors on the board of Max Life.