Committed to Axis deal; will follow earlier methodology: Max Life CEO

Max Life and Max Financial Services are committed to going ahead with the deal with Axis Bank, which will see the latter acquire another 7 per cent stake in the life insurance company, said the CEO

Despite the rap from the insurance regulator in the form of penalties, Max Life Insurance and Max Financial Services are committed to going ahead with the deal with Axis Bank, which will see the latter acquire another 7 per cent stake in the life insurance company, with the methodology that was followed earlier.

Max Life has paid the Rs 3 crore penalty imposed by the insurance regulator. A penalty of Rs 2 crore was also imposed on Axis Bank. In an order last week, the insurance regulator indicated that there were certain violations of its directions in the transaction of the transfer of shares of Max Life Insurance Company Limited between Max Financial Services Limited and Axis Bank/its subsidiaries.

In a statement this week, Max Life said that although it will pay the fine imposed by the regulator, it was of the firm belief it has not committed any wrongdoing.

“Max Life Insurance is an unlisted company and Max Financial Services is the owner. All the valuations which were done were as per the legally permissible valuation technique. The transaction happened in a private company between two shareholders and all the valuation methodologies we used were approved, legal valuation techniques,” said Prashant Tripathy, MD&CEO, Max Life Insurance, in a concall on Thursday.

Axis Bank and its subsidiaries Axis Capital Limited and Axis Securities are the co-promoter of Max Life Insurance following the acquisition of a 12.99 per cent stake in April 2021. Axis Bank is expected to raise its stake in the company in the coming quarters.

“There is no discrepancy. There was one agreement under which we could exercise our rights in a certain way, there was a second agreement which allowed us to buy shares in a certain way. They are two distinct separate agreements. We believe everything was above board and kosher. We believe we have done everything in the right way, the IRDAI has a different view. We are in conversation with them and whatever we have to do as and when we do it, we’ll let you know," said Amitabh Chaudhry, MD&CEO, Axis Bank. 

"In a transaction of this kind, there’s not just one party, there are four or five, there was Max Financial Services, Max Life, there was another Japanese promoter, there were lawyers involved everywhere, there were enough people involved who were checking all rules, regulations and guidelines to ensure that nothing is done which is outside of any regulation. Now, the regulator has taken a different stand, we are working towards it," Chaudhry said.

“We will apply for the 7 per cent share transfer approval and we will see what the regulator has to say. At this point in time, both Axis Bank, Max Financial Services, and Max Life remain committed. Axis Bank has reaffirmed their commitment to being the promoter as well as distribution partner,” Tripathy said on the call.

“At this point of time, we have no communication from the regulator around any valuation recommendation or guidance,” he further said.

Currently, the company is awaiting approval from the regulator on the transaction between Mitsui Sumitomo Insurance and Max Financial Services, the application for which was filed a year ago. Subsequently, the company will file an application with the regulator for the balance 7 per cent share transfer to Axis Bank.

“We are hopeful that in the next few weeks, we will have the approval for the MSI transactions, which is between Max Financial Services and MSI. Subsequent to that, we will file for approval for the balance 7 per cent with Axis Bank. We are hopeful that we will secure the approval like we secured the approval last time,” Tripathy said.

“I am very hopeful that the first part of the transaction, which is the MSI transaction, should happen in this financial year. On the second part, even last time, it took longer so it is difficult to comment if this happens in this financial year. But we will make the application in this financial year,” he added.