Axis-Max JV deal runs into Irdai wall

MUMBAI: Axis Bank Ltd’s proposal to form an insurance joint venture (JV) with Analjit Singh’s Max Financial Services Ltd through a 29% stake purchase in Max Life Insurance has hit a regulatory wall.

In a letter to Axis Bank and Max Life, the insurance regulator has sought a number of clarifications on the JV agreement, two people directly aware of the development said on condition of anonymity.

Axis Bank, the country’s third largest private lender, agreed to raise its stake in Max Life from 1% to 30% for ₹1,592 crore in April. The deal would involve Axis Bank buying 29% in Max Life from Max Financial. Concurrently, it was expected that Mitsui Sumitomo, which currently owns 25.5% in Max Life, would exchange its shares in the life insurer for a stake in the holding company. Max Financial Services currently holds a 73.5% stake in Max Life.

A Max Financial Services spokesperson said, “It is not appropriate for us to comment on correspondence, if any, with the regulatory authorities.” A spokesperson for Axis Bank also declined to comment. An email sent to Irdai chairman SC

Khuntia did not elicit any response.

The Insurance Regulatory and Development Authority of India (Irdai) has raised questions over four key clauses in the agreement, according to one of the two people cited above.

Firstly, Irdai has asked the two companies to clarify a clause related to a merger of Max Life with Max Financial Services in the future.

Another key clause in the JV agreement is a “put” option that allows Axis Bank to exit the venture.

The insurance watchdog has also sought a change in a clause that empowers one of the two parties to appoint auditors for the proposed JV.

Another clause that Irdai has asked the two companies to remove from the agreement relates to the presence of an observer in Max Life’s board meetings.

“This clause too goes against corporate governance and the JV agreement should avoid such clauses,” said the second person.

THE WATCHDOG HAS RAISED DOUBTS OVER FOUR KEY CLAUSES IN THE AGREEMENT