Bain, CVC Capital eye promoter stake in Max Financial Services

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Private equity funds Bain Capital and CVC Capital Partners are among those evaluating buying the promoter stake in Max Financial Services, the flagship listed company of serial entrepreneur Analjit Singh, said people in the know.

Max Financial, the country’s largest non-bank private life insurance company, is the parent entity of Max Life Insurance in which Axis Bank is a co-promoter with a 12.99% stake. Mitsubishi Sumitomo Insurance owns 21.86% of Max Financial Services. The Japanese group in 2012 bought out New York Life by buying its entire 26% stake in the then Max New York Life joint venture for ₹2,731 crore in cash, a deal that was then dubbed as the second largest in the insurance sector.

The Singh family – including Analjit Singh, his wife and children, and Max Ventures Investment Holdings, classified as the promoters of the company – owns a 11.45% stake in Max Financial. Public shareholders, including the Japanese financial group, own the remaining 88.55%.

The Singh family is working with advisors to help them in the stake sale, which is likely to trigger an open offer for an additional 26% since the transaction is expected to lead to a change of control.

“We remain engaged and invested in the company and are looking forward to its growth,” the company’s promoters said in a statement issued following ET’s queries.

Bain declined to comment. CVC Capital Partners did not respond to ET’ queries.

At Monday’s market capitalisation of about ₹29,100 crore, the Singh family’s stake is worth ₹3,332 crore. If the open offer triggered by a deal is successful, then the buyer may end up spending about ₹10,900 crore.

But the Singh family is seeking a significant control premium.

The discussions are at an early stage, said the people.

For fiscal year 2021-22, Max Financial posted a consolidated net profit of ₹318 crore, 43% lower compared with the previous year. Its sole operating subsidiary, Max Life Insurance, recorded a 27.4% increase in total new business premium (individual and group) to ₹1,528 crore. Its assets under management were ₹1,07,510 crore as on March 31, 2022, a rise of 19% over the previous year.

“Max Life is a high-quality life insurance company with strong agency channel, diversified product mix, stable and quality management team, etc. As investor concerns get addressed one by one – Axis Bank deal, corporate structure simplification – we believe there is no reason for the stock to trade at around 40%-50% discount to its listed peers, HDFC Life and SBI Life,” said Nidhesh Jain of Investec.

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Earlier this month, Axis Bank said it entered into a revised agreement following guidance from the insurance regulator to acquire another 7% stake in the insurance company at a fair market value using discounted cash flows instead of valuation.

The lender in 2021 had announced the acquisition of equity shares of Max Life Insurance, in association with subsidiaries Axis Securities Ltd and Axis Capital Ltd. As per the agreement, the Axis entities had collectively acquired 12.99% of the shares. In addition, they also had a right to acquire an additional stake of up to 7% in one or more tranches at a valuation as per 11UA of the Income Tax Rules (it deals with fair market value).

Mitsubishi Sumitomo too had rejigged its holdings in Max Life and Max Financial to simplify the holdings through a put and call option that was approved by the Max Financial board in 2020. The regulatory approvals for the last tranche of the transaction came through in November 2022.



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