Max Financial gets approval for share swap agreement with Mitsui Sumitomo

The transaction entails swapping Mitsui Sumitomo's 20.6 per cent stake in Max Life Insurance with 21.9 per cent stake in Max Financial Services

Max Financial Services (MFS), the parent company of Max Life Insurance, has received an approval from the Department of Economic Affairs (DEA) to swap Mitsui Sumitomo’s stake in Max Life Insurance with shares of the company, thus consolidating its holding in the life insurance arm. 

The transaction entails swapping Mitsui Sumitomo's 20.6 per cent stake in Max Life Insurance with 21.9 per cent stake in MFS, which will result in MFS's holding more than 93 per cent stake in the life insurance company. MFS will issue and allot 75.4 million shares, equivalent to 21.87 per cent of the paid-up share capital to Mitsui Sumitomo, according to the agreement. 

"This preferential issuance is in consideration for the transfer of equity shares constituting 20.57 per cent of the paid-up share capital of Max Life held the by Mitsui Sumitomo's to MFS as part of the share swap transaction”, the company said. “The transaction will be consummated upon receipt of approval from Insurance Regulatory and Development Authority of India (IRDAI),” it added.

Shares of MFS closed 1.06 per cent lower at Rs 612.55 a piece on the BSE. 

Currently, MFS holds 72.5 per cent stake in Max Life and MSI owns 25.5 per cent stake in the life insurance firm. Upon completion of this share swap agreement, it would take MFS a step closer to the fructification of its deal with private lender Axis Bank.

The bank had recently announced that according to the the Reserve Bank of India’s (RBI) advice, it along with its subsidiaries — Axis Capital and Axis Securities (Axis entities) — had entered into revised agreements with MFS to acquire about 19 per cent of equity stake in Max Life.

According to the revised deal, the bank will only acquire 9 per cent of the equity share capital of Max Life Insurance, and Axis entities will acquire a further 3 per cent of share capital of stake in Max Life. Furthermore, the Axis entities will have the right to acquire an additional 7 per cent stake in Max Life, in one or more tranches.

The Axis Bank — Max Life deal has been revised a few times as it has run into regulatory troubles with Irdai and the RBI. Initially, Axis Bank had intended to buy 29 per cent stake in the life insurance company.

Mohit Talwar, managing director, Max Financial and vice-chairman, Max Group, said, “Once concluded after regulatory approvals, this transaction will mark an important step for Max Financial to consolidate its shareholding in Max Life paving way for a new beginning in form of a joint venture with Axis Bank.”