Axis Bank, which recently announced entering into a strategic partnership with Max Financial for a deal in Max Life Insurance, is looking to buy an additional 17.9 percent stake in Max Life, sources with direct knowledge shared with CNBC-TV18.

Axis Bank is likely to pay around Rs 550 crore to Max Financial for the stake and own a total 19.9 percent stake in Max Life as it currently owns 2 percent, two independent sources indicated. The transaction will include an extension of the long-term insurance tie-up agreement with Axis Bank. Banking regulator, RBI’s approval is required for Axis Bank to buy additional stake in Max Life.

Sources suggest that the deal will be done at the book value of Max Life which is currently at Rs 3,050 crore. Max Financial Services currently owns 72.5 percent stake in Max Life and post the deal is likely to be reduced to 54.5 percent. Mitsui Sumitomo Insurance currently holds a 25.5 percent stake in Max Life.

The boards of both Max Financial Services and Max Life had approved a stake sale to Axis Bank on Feb 20, 2020. Notification to the exchanges said, “Axis Bank Limited and Max Financial Services Limited have entered into a confidentiality and exclusivity arrangement to explore a long-term strategic partnership” Axis Bank & Max Financial Services have signed a 90-day exclusivity agreement for the transaction.

Axis Bank spokesperson responded to CNBC-TV18’s query and said, “Axis Bank does not comment on market speculations.” Max Financial said, “We are under a confidentiality agreement. Hence we are not in a position to comment.”

The stock price of Max Financial gained on the back of the deal announcement. Nomura brokerage report said, “Agreement should address investor concerns on long-term distribution tie-up; maintain buy” it raised the target price for Max Financial Services to Rs 700/share. The deal is positive because Max Life’s bancassurance arrangement with Axis Bank contributes 54 percent to its business and was up for review in September 2021.

First Published:Feb 25, 2020 3:02 PM IST