MFs sold 16 million shares of Max Financial Services in 2 months

Heavy selling came when, after the HDFC-Max deal, the counter was hitting a 52-week high

Indian equity mutual fund managers have sold nearly 16 million shares of Max Financial Services ever since the deal between HDFC Life and Max Life Insurance was buzzing in June. Against a holding of 59.72 million shares in Max Financial Services in June, fund houses currently hold 44 million shares as on August 31. The massive selling came at the start of the current quarter in July, when fund managers sold 18.1 million shares at an average price of Rs 580 apiece. The month witnessed the counter of Max Financial hitting a 52-week high of Rs 627 — a jump of over 80 per cent in the current financial year.

Sector lobby Association of Mutual Funds in India (Amfi), in a meeting early this week, opposed the non-compete fees of Rs 850 crore being paid to Analjit Singh and other promoters of the Max group. According to them, this was an unfair deal for the minority shareholders of Max Financial Services. Amfi urged fund managers to vote against the deal. Voting will be over on September 24.

“This money should have come to the minority shareholders which also include us. It is against ethics and I am opposed to this proposal of non-compete fees to a person entity and not the shareholders,” said the chief executive officer (CEO) of a fund house, who did not wish to be named.

Taking into account the holding of 44 million shares, the stake of fund houses in Max Financial Services at the closing price of Thursday stands at about 16.48 per cent.

Put together, a little more than Rs 2,500 crore of equity assets have found its way into the counter of Max Financial. This is quite a substantial amount. What is interesting is the fact that nearly Rs 1,675 crore or about 70 per cent of the total is invested by a dozen of the top schemes.

Among the top schemes having most investment in Max Financial Services are Reliance Equity Opportunities (Rs 348 crore), ICICI Prudential Value Discovery Fund (Rs 262 crore), Motilal Oswal MoST Focused Multicap 35 (Rs 178 crore), Kotak Select Focus (Rs 162 crore), HDFC Mid Cap Opportunities (Rs 139 crore), Reliance Growth Fund (Rs 135 crore) and Reliance Regular Savings Fund (Rs 69 crore), among others.

Though, Amfi has requested fund houses to oppose this during the voting, fund managers told Business Standard it was their own call, which may or may not be in line with Amfi’s, signalling the possibility of divergent views on the matter.

“We have booked good gains on the counter as we were buying into the stocks till May-June. Given the sudden steep rally in Max Financial during June-July period, we took a sell call on the counter and booked profits,” said the chief investment officer (CIO) of a fund house, who seemed unperturbed with the non-compete clause and said the counter had made much more than that.

It is worth noting that the stock was hovering between Rs 340 and Rs 390 during April-May. But, after that, it surged sharply and touched a high of Rs 627 in July — a gain of over 80 per cent since the start of the financial year. During the same time, benchmark stock indices were up in higher single digits.