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Axis Bank, along with its subsidiaries on Wednesday announced to acquire the remaining 7 percent stake in Max Life Insurance. The bank said, in an exchange filing, that Acquisitions, Divestments and Merger Committee has approved infusion of Rs 1,612 crore in Max Life through preferential allotment.

The combined weight of Axis Bank, Axis Securities, and Axis Capital has already provided them with a significant 12.02 percent stake in Max Life. With the acquisition of the additional 7 percent stake, the collective holdings of Axis Entities will surge to a slightly over 19.02 percent stake in Max Life. Notably, this strategic move will also see an increase in Axis Bank's direct stake in Max Life to 16.22 percent.

"Axis Bank Limited (“Axis Bank”) and its subsidiaries, i.e., Axis Securities Limited and Axis Capital Limited (together referred to as “Axis Entities”) have entered into agreements (including amendments thereto) with Max Financial Services Limited (“Max Financial”), with regard to acquisition of equity stake of Max Life Insurance Company Limited (“Max Life”) and matters incidental thereto."

"The Acquisitions, Divestments and Merger Committee of the Board of Directors of the Bank at their meeting held on August 9, 2023 has approved the proposal for the Axis Bank to infuse Rs. 1,612 crores in Max Life through preferential allotment, resulting in Axis Bank’s direct stake in Max Life increasing to 16.22 percent and the collective stake of Axis Entities increasing to 19.02 percent," the bank said in the exchange filing.

The acquisition price has been fixed at Rs 113.06 per share for the balance stake, witnessing a substantial increase from the initial acquisition price of Rs 32 per share for the first 13 percent stake. The development will cement the position of Axis Entities comprising Axis Bank, Axis Securities, and Axis Capital, as key stakeholders in the insurance giant.

This acquisition, the bank said, would strengthen its position in Life Insurance business. It would be done at Fair Market Value using Discounted Cash Flow method.

The acquisition would be through subscription to the Preferential Issue of 14,25,79,161 fully paid-up equity shares of face value of Rs 10 each, at a fair market value of Rs 113.06 per share (arrived at as per extant regulations and including a share premium of Rs 103.06 per equity share), Axis Bank said.

However, this development has not been devoid of regulatory scrutiny. The Insurance Regulatory and Development Authority of India (IRDAI) had previously fined Axis Bank and Max Life for violating rules in their earlier deal. The regulatory authority had mandated Axis Bank and Max Life to acquire the balance stake at fair market value, highlighting the importance of compliance and transparency in such transactions.