Max Financial shareholders approve non-compete fee

Only about 140 million of 185 million eligible votes were polled by Max Financial's minority shareholders

The resolution for payment of Rs 850-crore non-compete fee to promoter group shareholders of Max Financial Services led by Analjit Singh sailed through, with 65:35 majority among the votes polled. The fee was a critical element in the three-way merger deal between Max Financial Services, Max India and HDFC Life Insurance.

The non-compete agreement seeks to compensate Singh and associated entities for restrictions to carry out life insurance, distribution, reinsurance and pension businesses, his directorships and even financial investments in competing entities, directly or indirectly. The promoters would not be promoters of the merged entity and would not have any board seats.

Of the 185.72 million eligible votes held by minority shareholders, only 139.95 million exercised their franchise through postal ballot and e-voting. Of these, 90.5 million, or 64.67 per cent of the votes polled, went in favour of the resolution, while 49.43 million or 35.33 per cent went against, according to the voting details published by the company.

The company did not disclose the break-up of public institutions and non-institutional shareholders that voted in the postal ballot process. Since the promoters were interested in the transaction, they did not participate in the voting.

Business Standard had last week reported that funds associated with private equity giant KKR and Wall Street investment bank Goldman Sachs, which together held about 25 per cent in the company, were in favour of the transaction. Assuming these voted in favour, that would account for about 67.84 million votes.

The final numbers suggest in addition to the above institutions, the resolution has received about 23 million votes from other institutions and smaller shareholders despite frantic calls by proxy advisory firms and even a panel of the Association of Mutual Funds of India (Amfi) to defeat the proposal.
 
Other large minority shareholders are IFC (3.1 per cent), Reliance Capital (2.2 per cent), ICICI Prudential Value Discovery Fund (1.7 per cent), New York Life (1.3 per cent), Government Pension Fund (1.2 per cent) and Motilal Oswal Most Focused Multicap (1.2 per cent). About 45,000 small shareholders hold around 6.5 per cent.

Poll Results (votes in million)

Postal ballot e-voting total %

Assent 26.87 63.63 90.51 64.67

Dissent 0.28 49.15 49.43 35.33

Total 27.16 112.79 139.95

Source: Company filing