Max Financial shares jump 10%, Axis Bank up around 4% as IRDAI approves stake acquisition

Updated : February 25, 2021 10:17 AM IST

Shares of Max Financial Services were locked in a 10 percent upper circuit.

Axis Bank rose as much as 3.7 percent to its day's high of Rs 776.90 per share.

Shares of Max Financial and Axis Bank surged on Thursday after the Insurance Regulatory and Development Authority of India (IRDAI) gave its nod for the acquisition of up to 12 percent stake in Max Life Insurance by Axis Bank and its subsidiaries.

Shares of Max Financial Services were locked in a 10 percent upper circuit at Rs 938.65 per share on the NSE which was also its 52-week high. Meanwhile, Axis Bank rose as much as 3.7 percent to its day's high of Rs 776.90 per share.

As per the proposed transaction, Axis Entities have the right to acquire up to 19 percent stake in Max Life. Of this, Axis Bank proposes to acquire up to 9 percent, and Axis Capital Limited and Axis Securities Limited together propose to acquire up to 3 percent in the first leg of the transaction amounting to 12 percent.

Axis Entities have the right to acquire an additional stake of up to 7 percent in Max Life over the next few years.

Brokerages remained bullish on both the stocks post the stake acquisition approval. While Morgan Stanley is 'overweight' on Axis Bank, CLSA and Jefferies have 'buy' calls on Max Financial.

"IRDAI nod for Max deal removes the distribution overhang. The Axis JV can help structural improvement in growth outlook and VNB margin," CLSA said in a report adding that Max is its top pick in the space.

Jefferies raised earnings estimates for Max post the deal and said that the visibility of this agreement could support re-rating. It upgraded the stock to 'buy' and raised the target to Rs 1,000 per share.

In January this year, the Competition Commission of India (CCI) had approved the stake acquisition.

In October 2020, the Reserve Bank of India (RBI) overruled Axis Bank's initial proposal to raise the stake to 29 percent and pared it to an aggregate of 19.02 percent.

The private sector lender planned to buy a 29 percent stake in the insurer, but changes had to be made in the deal following communication with IRDAI.

Analjit Singh, Chairman of Max Group and Max Financial Services said, "We have been looking forward to bringing Axis Bank in this construct as a joint venture partner in Max Life. I am confident that this joint venture will strengthen our position as a top leader in the Indian Life Insurance sector which is showing clear indications of rapid and enduring growth."

Published : February 25, 2021 10:17 AM IST

Max Financial shares jump 10%, Axis Bank up around 4% as IRDAI approves stake acquisition

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