InvestorQ : How do you see the Axis Bank merger deal with Max Life taking off?
manisha Kolvenkar made post

How do you see the Axis Bank merger deal with Max Life taking off?

Crowny Pinto answered.
2 years ago

It looks like we may finally see a fructuous end to the Axis Bank-Max Life Insurance deal. Now, both the companies have agreed to amend or get rid of clauses in their transaction that had been objected to by the insurance regulator, IRDAI.

As per the terms of the deal Axis Bank will hike its stake in Max Life from 1% to 30% by paying Rs.1592 crore. Max Financial holds 73.5% stake in Max Life while the Japan-based Mitsui Sumitomo holds nearly 25.5%. The modifications to the terms should see through.

It may be recollected that IRDAI had objected on 4 grounds. These include, a put option for Axis Bank to sell stake, a potential merger of Max Life with its parent at a future date, placing an observer in the Max Life board, and singular rights to appoint auditors.

Both Max Life and Axis Bank have now agreed and have gone to the extent and erased some of these controversial clauses in their agreement in order to get IRDAI approval at the earliest. However, the deal will still be subject to final approval from the IRDAI.

Earlier, in 2016 IRDAI had blocked the proposed merger of Max Life with HDFC Standard Life Insurance on similar grounds, after which HDFC decided to call off the deal. Subsequently, the CEO of HDFC Life moved as the CEO of Axis Bank and revived the deal with Max Life.

While the put option has been deleted as has the proposal to merge with Max Financial, it has also been decided to change the audit clause. Now both parties have agreed to allow equal rights to Max Life and Axis Bank for appointment of auditor.

Both Axis and Max need the deal badly. The big 3 consisting of SBI Life, HDFC Life and ICICI Pru Life have grown on the back of the Bancassurance model. Axis and Max need to get together to make that quasi bancassurance model work for them too.