In a partial setback to Axis Bank, the Reserve Bank of India (RBI) has disallowed the private sector lender to directly acquire 17 per cent stake in Max Life Insurance. Now the lender will have to purchase shares in the life insurer along with its subsidiaries, Axis Capital and Axis Securities.
"In response to Axis Bank's application to the RBI for directly acquiring 17.002 per cent of the equity share capital of Max Life, the central bank has advised Axis Bank that the application for direct acquisition has not been considered," the private sector lender said in a filing to the Bombay Stock Exchange.
Axis Bank has been advised to be guided by the relevant regulations of RBI, it added.
As per the revised deal, Axis Bank and its subsidiaries, i.e. Axis Capital Limited and Axis Securities Limited, have agreed to enter into revised agreements with Max Financial for the acquisition of up to 19.002 per cent of the equity share capital of Max Life. Axis Bank's total stake in Max Life will remain within the limits stipulated under the applicable laws and regulations, it said.
Under the revised agreements, Axis Bank will acquire up to 9.002 per cent of the equity share of Max Life, and Axis Capital Limited and Axis Securities Limited will together acquire up to 3 per cent of the share of Max Life. In addition, Axis Entities will have a right to acquire an additional stake of upto 7 per cent of the equity share of Max Life, in one or more tranches, in accordance with existing laws and regulations.
The revised agreements will supersede the previous agreements entered into between the parties. The transaction is subject to conditions precedent, including regulatory approvals, it further stated.
In August this year, Axis Bank had entered into a definitive agreement with Max Financial Services Ltd (Max Financial) for the direct acquisition of 17.002 per cent of equity share capital of Max Life Insurance Company Ltd (Max Life) by the lender.
Initially, Axis Bank had proposed to acquire 29 per cent stake in Max Life. However, some changes had to be made to the deal following guidance from the Insurance Regulatory and Development Authority of India (Irdai).
Currently, the private lender holds about 1 per cent stake in Max Life and is the biggest banking channel partner for the distribution of the insurer's products. Products sold through the bank reportedly account for 54 per cent of Max Life's revenues.
Meanwhile, shares of Axis Bank closed at Rs 492.40 apiece on BSE, down 0.26 per cent from previous close.