Private-sector lender Axis Bank has changed for a second time its plan to acquire a stake in Max Life Insurance Company Ltd in a bid to secure regulatory approvals for the deal.
Axis Bank said in a stock-exchange filing Friday that the lender and its units will sign a revised agreement with Max Financial Services Ltd to acquire a stake of 19.002% stake in Max Life.
The bank will itself initially buy 9.002% of Max Life while Axis Capital Ltd and Axis Securities Ltd will purchase up to 3%. The two units will also have the right to acquire another 7% stake in the insurer.
The deal is being revised after the Reserve Bank of India rejected Axis Bank’s application for approval and advised it to tweak the pact, the private-sector lender said.
Axis Bank had in April decided to buy a 29% stake in Max Life but reduced the size of the stake to 17% in August after objections from the insurance regulator.
Axis Bank had first invested in Max Life a decade ago. Its plan to take a bigger stake in the insurer was aimed at beefing up its presence in the insurance industry.
Max Financial currently holds a 72.5% stake in Max Life while Japan’s Mitsui Sumitomo Insurance owns 25.5%. The Japanese company would swap its stake in the insurer with a stake in Max Financial.
As per the deal originally announced in April, Max Financial was to own 70% of the insurer after the transaction was completed.
As per the original deal, Max Financial and Axis Bank had agreed to list Max Life in a few years’ time through a merger with Max Financial. If this couldn’t go through, then Axis Bank’s stake in Max Life would be swapped with a stake in Max Financial. In case the first two options were not consummated within 63 months from the closing of the deal, Axis Bank had a put option to sell all shares in Max Life at Rs 294 apiece apiece.
It isn’t clear if the revised deal changes the put option that would give a huge upside to Axis Bank.
Max Life is the largest non-bank life insurance company in India and the fourth-largest in the Indian private sector overall. However, not having a bank promoter has not been revenue-positive for the firm as banks have overtaken insurers as the biggest distributors for policies.