Axis Bank, the country’s third-largest private sector lender had announced on Monday, that it would acquire a 17% stake in Max Life, instead of 29%, according to the decision made in April. However, on July 23, Axis Bank, in the regulatory filing, said that banks and the MFS had agreed to certain value creation options and related rights.
In a regulatory filing, the Axis Bank stated that they proposed to acquire 17.002% of the equity share capital of Max Life, which may result in 18% of total ownership after the transaction. ”The parties executed the definitive agreements. At the earliest, the Axis Bank and Max Life will approach the respective regulatory authorities, with revised applications for their consideration and approval. The transactions will also be subjected to regulatory approvals.
To become joint venture partners in Max Life insurance, in April, the Axis bank and Max’s financial services (MFS) had declared the signing of definitive agreements. The deal turned into worth around Rs.1,600 crore. Max financial services at present hold 72.5% stakes, in Max Life while Mitsui Sumitomo Insurance (MSI) and Axis bank preserve 25.48% and 1.99% stakes respectively.
Former the deal was planned in a way that MSI would have a 21.87% stake of MFS stake in exchange of 20.57% of Max Life through a share swap transaction. In the next step, MFS and MFI were to acquire a 1% stake in Max Life from Axis. Later MFS would give a 29% stake in Max Life and finally MFS would take a balance 5.17% stake from MSI.
However, on July 23, Axis Bank, in the regulatory filing, said that banks and the MFS had agreed to certain value creation options and related rights. ” Based on correspondence from IRDAI received by the organization, Axis bank and the MFS have agreed to make some adjustments to the price creation options and element in a few alternate mechanisms subject to regulatory approvals and as may be approved under the relevant law.” stated Axis bank.
According to the sources, the insurance regulator had raised queries on the value creation option. If the value creation options had been no longer consummated within 63 months from the closing, the transactions provided for a put option for Axis bank on the organization to sell all shares held by the bank in Max Life at a price of Rs.294 in keeping with proportion (subject to adjustments collectively agreed between parties) within 9 months of exercising of such put option. Axis bank became to accumulate a 29% stake in Max life from MFS at over Rs.28.62.
IRDAI data showed that first year premiums for Max Life Insurance between April and July period were Rs.1,369.15 crore compared to Rs.1,354.15 crore in the previous year. Max Life Insurance market share was at 1.89% in July in the life insurance industry. On Monday the stock price of Axis Bank ended the day at Rs. 445.70 up to by 1.20% or Rs.5.30 on the BSE. While the stock of Max Financial services ended at Rs.549.70 decreased by 1.38% on the BSE.
