Three months after inking the stake sale deal with Axis Bank Ltd, Max Life Insurance Ltd has been asked by the Insurance Regulatory and Development Authority of India (IRDAI) to rework it as it's not convinced with the "value creation options" and "related rights" conditions.
As per the definitive agreements entered into by the two companies, they had agreed to "certain Value Creation Options and related rights, which permitted Axis Bank to exit from the deal at a fixed price. Specific details about the changes requried have not been disclosed.
After the IRDAI directive, both the companies have agreed to make some changes to the value creation options and factor in some alternate mechanisms, subject to regulatory approvals and as may be permitted under applicable law, the companies have told the stock exchanges.
The agreement between the two said if these "value creation options" are not availed in 63 months of the deal, Axis Bank can avail a "put option" with Max Financial and sell its shares in Max Life at Rs 294 apiece. Max Financial Services currently owns a 72.5 per cent stake in Max Life and Mitsui Sumitomo Insurance holds 25.5 per cent stake.
Axis Bank on April 28 bought 29% stake in Max Life Insurance Company Limited, a material subsidiary of Max Life Financial Services Ltd, after entering into a 70:30 joint venture at an estimated Rs 1,600 crore deal.
The acquisition of a 29 per cent stake in Max Life insurance would give it a foothold in the fast-growing life insurance business. In a market with two dozen players, Max Life is the fourth largest life insurance player only next to LIC, ICICI Pru and HDFC Life.
The bank currently has half a dozen financial subsidiaries. The prominent among them are in a mutual fund, NBFC, broking and capital markets. The mutual fund business has assets under management of Rs 1.38 lakh crore. The NBFC business runs a lending book of Rs 7,591 crore. The broking subsidiary has over 2 million clients.
Max Financial has a market cap of about Rs 15,350 crore. Axis Bank stock was trading at Rs 445, down 3.46 per cent, while Max Financial Services share was trading at Rs 564.50, down 1.03 per cent, on the National Stock Exchange on Friday.