Max India, Axis Bank rework equity deal on Max NY Life stake

K.R. Srivats Updated - March 12, 2018 at 02:19 PM.

Max India has renegotiated an existing equity arrangement with Axis Bank as regards the latter’s 4 per cent stake holding in Max New York Life Insurance (MNYL).

The Board of Directors of Max India today approved the purchase of 4 per cent equity stake held by Axis Bank in MNYL, in tranches not exceeding 1 per cent equity every year.

The entire 4 per cent stake buy would be completed before October 2020 and involve a total estimated cash outflow of Rs 414 crore for Max India.

Out of this 4 per cent, a maximum of 1 per cent will be purchased in the next few days, Mr Mohit Talwar, Deputy Managing Director of Max India, told

Business Line .

He described the latest deal as a “win-win” for both Max India and Axis Bank. For Axis Bank, the re-working of the equity arrangement would mean acceleration of the put option, which would have otherwise been available only in 2013.

For Max India, this deal would ease cash flow as the 4 per cent stake buy is amortised over several years and not only in 2013 as envisaged earlier, Mr Talwar pointed out.

In October 2010, Axis Bank and Max India had entered into two agreements — one for corporate agency and the other is for purchase of 4 per cent stake in MNYL by Axis Bank.

This equity arrangement provided for a put option to Axis Bank that could be exercised in 2013 (three years from the date of the deal).

Mr Talwar said that today’s decision on the equity side would not in any manner affect the bancassurance arrangement that is already in existence. Axis Bank would continue to distribute MNYL products under the 2010 corporate agency agreement that is expected to be valid for ten years, he said.

The trigger for the reworking this equity arrangement is the price discovery that has happened in the shares of MNYL following the 26 per cent stake transfer in the life insurance company to Mitsui Sumitomo Insurance Co, Japan.

“The stake sale of 1 per cent to Axis Bank has happened at the same price (about Rs 54 per share) as discovered in the Mitsui Sumitomo transaction”, Mr Talwar said.

In April this year, Tokyo-based MS&AD Insurance Group Holdings said it was buying 26 per cent in MNYL.

In an all-cash transaction, MS&AD has paid Rs 2,731 crore ($535 million) for the 26 per cent stake. This transaction values MNYL at Rs 10,504 crore ($2.1 billion). It also marked the entry of MS&AD, which already has presence in Indian general insurance, into the life insurance sector here.

MS&AD has acquired the 26 per cent stake in MNYL from New York Life International Holdings (16.63 per cent), a Mauritius entity, and Max India (9.37 per cent). Meanwhile, MNYL today announced the completion of 26 per cent of its stake transfer to Mitsui Sumitomo Insurance Co. Ltd, which is part of MS&AD.

>krsrivats@thehindu.co.in

Published on June 27, 2012 16:38