Axis Bank is set to acquire 29 percent stake in unlisted Max Life Insurance Co. on Tuesday. The board of Axis Bank has approved the purchase, taking the private sector lender's total stake in the insurer to 30 percent.
Under the deal, Axis will acquire 55.6 crore shares from Max Financial Services, which holds 72.5 percent stake in Max Life, at the book value of the insurance company. whenever the deal is consummated. At Max Life's current book value of Rs 28.61, the deal size is roughly Rs 1600 crore.
In an analyst call post market hours, Amitabh Chaudhry, MD and CEO, Axis Bank, said the exact pricing could vary at the time of the transaction.
The transaction is subject to satisfaction of conditions precedent, including receipt of regulatory approvals from Reserve Bank of India, Insurance Regulatory and Development Authority of India and Competition Commission of India, among others.
CNBC-TV18 was first to break the Axis Bank-Max Life deal on February 20. Axis Bank, India's fourth-largest private sector lender, already holds under 2 percent stake in Max Life. Post deal, it will become the single-largest shareholder in the insurance firm.
“We continue to believe in the long term prospects of India’s under-penetrated life insurance space, current environment notwithstanding. We see this joint venture creating immense value for our stakeholders given our long standing, high performing partnership with Max Life,” Chaudhry said.
Axis Bank shares rallied 5 percent to Rs 448.5 on the BSE on Tuesday, buoyed by the deal with Max Life. The sentiment also remained upbeat ahead of its Q4 earnings.
The bank reported a net loss of Rs 1,387.78 crore for the quarter ended March, 2020, as provisions torward bad loans surged. The bank had posted a net profit of Rs 1,505.06 crore in the same quarter last year. A CNBC-TV18 poll had estimated a net profit of Rs 1580.1 crore.
Welcoming the development, Analjit Singh, founder and chairman, Max Group, said, “This move is an emphatic signal that Max Life will become an even more formidable player in the Indian life insurance space. …I believe that in Axis, we have found an exceptional partner and we have conviction that this will make Max Life fundamentally stronger, better performing and will bring stability to the franchise.”
Analjit Singh will remain the promoter of Max Life, with similar rights in place.