Anti-trust body Competition Commission of India (CCI) has approved 26% stake transfer in Max New York Life Insurance (MNYL) to Japan's Mitsui Sumitomo Insurance Company.
With the stake transfer, the US-based New York Life will exit from the joint venture with Max India.
Max India is the holding company of MNYL which is a joint venture between Max India and New York Life.
"...The assessment of the proposed combination, the Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the Commission hereby approves the proposed combination," CCI said in a notification.
According to the share purchase agreement, Mitsui Sumitomo will acquire 16.63% equity share capital of MNYL from New York Life and 9.37% from Max India.
By way of a separate agreement on April 12, 2012, New York Life has sold its 9.37% shares in MNYL to Max India.
"Subsequent to the proposed combination, New York Life would completely exit from MNYL and Max India and Mitsui Sumitomo would control MNYL with Mitsui having 26% shareholding," it said.
Post combination, the shareholding of other shareholders in MNYL would remain unchanged with Max India being the largest shareholder holding 69.78% of equity capital of MNYL while Axis Bank holds the balance 4%.
Japanese insurance company Mitsui Sumitomo and its subsidiaries is manily engaged in non-life insurance business across the globe. And it is not engaged in life insurance sector in India.
It is present in India through its investment in Cholamandalam-MS General Insurance Company with 26% equity shares and in Cholamandalam-MS Risk Services with 50% share.
Cholamandalam-MS General Insurance is engaged in general insurance business in India and Cholamandalam-MS Risk Services is engaged in risk management and engineering solutions in the fields of safety, health and environment.
As per the existing laws, FDI up to 26% is allowed in the insurance sector under automatic route.
Indian insurance sector has 42 private players in life and general insurance business sharing about 30% of the market share in life insurance and 41% of the market share in general insurance sector.
In 2010-11, the top five companies in India accounted for around 87% of the business. While, LIC is the largest player with about 69.78% market share, the market share of MNYL in life insurance industry is only 1.99%.
Shares of Max India today closed at Rs 186.55 apiece on the BSE, up 1.3% from the previous close.