Axis-Max valuation under insurance regulator’s lens
MUMBAI: The sharp discount in the proposed valuation of Max Life Insurance Co. Ltd has attracted the attention of the country’s insurance regulator, which has decided to seek more details of the transaction.
In March, Mitsui Sumitomo Insurance had agreed to sell its Max Life shares at ₹108 per share. A month later, Axis Bank agreed to increase its Max Life stake from 1% to 30% at ₹28.61, pricing the same shares at a steep discount.
The Insurance Regulatory and Development Authority of India (Irdai) is planing to seek details of deal pricing to understand the rationale behind the discount, two people aware of the matter said. “Even though the pricing has been decided bilaterally between the promoters of Max Life and Axis Bank, Irdai’s contention is that when a recent deal (in March) valued Max Life at ₹108 per share, in April, what was the basis of valuing the same set of shares at ₹28.16 apiece,” said the first of the two persons, both of whom spoke under condition of anonymity.
The March deal involved Max Financial Services Ltd, the promoter of Max Life, entering into an agreement with Japan’s Mitsui Sumitomo Insurance
Co. Ltd to swap its shareholding in Max Life Insurance for a stake in the parent Max Financial. As part of the deal, Max Financial, the parent of Max Life, agreed to issue 7.54 crore preferential shares to the Japan-based firm at ₹565.11 apiece. In return, Mitsui Sumitomo agreed to transfer 39.48 crore shares, or 20.57% stake, of Max Life Insurance at ₹108.02 apiece to Max Financial.
On April 28, Axis Bank agreed to buy 29% in Max Life and form a JV with Max Financial, in which the bank’s total holding would be 30%. However, the deal structure was revised last week, with Axis
Bank now proposing to buy only 17% in Max Life to form the JV. If completed, this will result in Axis Bank holding a total of over 18% in Max Life, since it already holds a little over 1% in the insurer and is the latter’s bancassurance partner.
Emails and messages sent to Irdai, Max Life and Axis Bank remained unanswered.
In the June quarter, Max Life, which is the fifth largest private life insurer in terms of new business premium, collected a new business premium of ₹899.42 crore, which is 1.1% lower than ₹909.4 crore it collected a year ago.
Axis Bank is Max Life’s bancassurance partner.