Axis Bank's infusion will give Max Life enough capital for 2 yrs: Tripathy

This deal was for Axis Bank to go up to 20%, and in the first tranche they had done 13 and 7 more was to go

Max Life Insurance will look into the possibility of reverse merger with parent Max Financial Services after Axis Bank’s capital infusion, says managing director (MD) & chief executive officer (CEO) Prashant Tripathy, in an interview with Manojit Saha for the Business Standard Banking Show. Edited excerpts:

Axis Bank has recently decided to increase stake in Max Life by 7 per cent to 19.02 per cent. There were certain reports that the market regulator sought clarification from Max Life. What is the nature of those clarifications?

This deal was for Axis Bank to go up to 20 per cent. Subsequently, Insurance Regulatory and Development Authority of India (IRDAI) had objections with respect to pricing methodology and it actually told us to follow a discounted cash flow (DCF) methodology of valuation. The Securities and Exchange Board of India (Sebi) also asks us questions with respect to the valuation methodology, which was used earlier. All the responses have been given. We are waiting to hear from Sebi. That proposal as well as valuation methodology was approved by 99.9 per cent shareholders.

What does this deal mean for Max Life Insurance?

All this means great for all stakeholders. The biggest stakeholder is Max Life Insurance. We are going to receive ~1,612 crore of primary capital in our company. Our solvency ratio was 188. That will see an absolute 39 per cent jump. So, we will have enough capital. It’s a growing company. We are growing rapidly. A growing life insurance company or financial services company needs capital. So, it will give us enough capital for at least two years of growth; so that’s a plus for us.

What about an IPO to raise funds and listing?

Max Financial Services is a listed company. We are the only subsidiary. So, in a way, we are quasi-listed. Once the stake in Axis Bank is done and goes up to 20 per cent, we will review all the possibilities to figure out a way of listing. It could be in the form of figuring out a way so that Max Financial Services and Max Life Insurance could become one and be a listed company.

So, you mean to say you will go for a reverse merger with Max Financial Services?

We will review some of those structures. There is no point having two listed companies, one at the top core and the other at the bottom core.

Do you have any time frame in mind when that’s going to happen?

We will make an attempt after the Axis transaction is done.

This transaction will take four to six months…

That’s what we are hoping for. There are legal processes that we need to follow.

Max Life has reported 27 per cent growth in new business premium during the April–August period on a year-to-date (YTD) basis. What kind of new business premium growth do you expect in the current financial year?

We have maintained that there will be growth for almost the entire year, with the exception of March. March was an unusual month because of tax changes. We’ll try to remain in the range of over 20 per cent, so that’s going to be our target. It is going to be driven by all channels, and all product categories.

There are some recent reports, which suggest that there’s a huge increase in the number of policies surrendered or lapsed. And, it is due to macroeconomic factors like high inflation, rising unemployment and others. Do you see that as a challenge?

No, I have not seen that for our company. I just reviewed it two days ago. We’re not seeing in terms of numbers — the number of policies being surrendered is high. Many people, who have unit-linked insurance plans (ULIPs), actually chose to withdraw their money if they perceived that the market was going down.