Max Financial Services (MFSL), the parent company of Max Life Insurance, has received an approval from the department of economic affairs (DEA) of the ministry of finance to swap Mitsui Sumitomo’s stake in Max Life Insurance with shares of itself, thus consolidating its holding in the life insurance company.
Essentially, the transaction entails swapping Mitsui Sumitomo’s 20.6 per cent stake in Max Life Insurance with 21.9 per cent stake in MFSL, which, will result in MFSL holding more than 93 per cent stake in the life insurance company. MFSL will issue and allot 75.4 million shares, equivalent to 21.87 per cent of the paid up share capital to Mitsui Sumitomo as per the agreement.
“This preferential issuance is in consideration for the transfer of equity shares constituting 20.57 per cent of the paid-up share capital of Max Life held the by Mitsui Sumitomo’s to MFSL as part of the share swap transaction”, the company said in a statement.
“The transaction will be consummated upon receipt of approval from Insurance Regulatory and Development Authority of India (IRDAI)”, it further added.
Currently, MFSL holds 72.5 per cent stake in Max Life and MSI owns 25.5 per cent stake in the life insurance company. Upon completion of this share swap agreement, it would take MFSL a step closer to the fructification of its deal with private lender Axis Bank.
The bank had recently announced that as per the central banks’ advice, it along with its subsidiaries–-Axis Capital and Axis Securities (Axis entities)-–have entered into revised agreements with MFSL to acquire upto 19 per cent of equity stake in Max Life. According to the revised deal, the bank will only acquire 9 per cent of the equity share capital of Max Life Insurance, and Axis entities will acquire a further 3 per cent of share capital of stake in Max Life. Furthermore, the Axis entities will have the right to acquire an additional 7 per cent stake in Max Life, in one or more tranches.
The Axis Bank – Max Life deal has been revised a few times as it has run into regulatory troubles with Irdai and the Reserve Bank of India. Initially, Axis Bank had intended to buy 29 per cent stake in the life insurance company.
Mohit Talwar, MD, Max Financial and Vice Chairman, Max Group, said, “Once concluded post regulatory approvals, this transaction will mark an important step for Max Financial to consolidate its shareholding in Max Life paving the way for a new beginning in form of a joint venture with Axis Bank.”
Shares of MFSL were trading 0.63 per cent higher at Rs 623 on the BSE than the previous days’ close.