Axis Bank has signed a deal to hold a 30% stake in Max Life Insurance Company Ltd, as India’s third-largest private-sector lender looks to beef up its presence in the insurance industry.
The bank, which already holds a small stake in Max Life, said in a statement it will buy a 29% stake in the insurer from Max Financial Services Ltd.
Max Financial will own 70% of the insurer after the deal is completed.
Max Financial currently holds a 72.5% stake in Max Life while Mitsui Sumitomo Insurance owns 25.5%. The Japanese company is swapping its stake in the insurer with a stake in Max Financial.
Axis Bank didn’t disclose the amount it is paying for the stake, saying only that the purchase price shall be arrived on the basis of Max Life’s valuation. However, media reports said it may spend Rs 1,600 crore (about $210 million) in two stages.
Axis Bank had first invested in Max Life a decade ago. In February, the bank said it was exploring a deeper tie-up with Max Life.
Max Life is India’s largest private-sector life insurer that’s not owned by a bank, and the fourth-largest in the private sector overall. India has 57 insurance companies. Of these, 24 are life insurers and 33 general and health insurers.
Axis Bank is one of the top private-sector lenders that don’t run their own life insurance ventures. Its closest peers—HDFC Bank, ICICI Bank and Kotak Mahindra Bank—all have life insurance businesses.
The joint venture will “significantly improve” Max Life’s competitive position versus its competitors, including the other large bank-owned private life insurers, the statement said.
Upon the closing of the transaction, Max Group head Analjit Singh will remain the promoter of Max Life. Axis Bank will have the right to nominate three directors and Max Financial four. The bank will also identify one nominee director of the promoter group on the board of Max Life.
The transaction will be subject to approval by the central bank, the Competition Commission of India and other regulators. It is likely to be completed in six to nine months’ time.
Max Financial had tried to sell a stake in Max Life previously, too. In August 2016, Max entered into negotiations with HDFC Ltd to merge Max Life with HDFC Standard Life Insurance Co. This deal could have created India’s biggest life insurer in the private sector. But this came unstuck in 2017 after the Insurance and Regulatory Development Authority of India objected to the transaction structure.
