Max India Ltd on Tuesday announced that it will explore a capital reduction program to reward its shareholders. The company plans to offer its public shareholders the option of taking Rs 85 per share for up to 20 percent of their shareholding in lieu of cancelling these shares.

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Post capital reduction, Max India's outstanding shares will decrease by up to 20 percent, to 4.3 crore from 5.38 crore.

The cash out through a Capital Reduction process translates to a 37 percent premium to Monday's closing price of Rs 62 per share,

The company’s promoter/ promoter group shall not participate in the capital reduction. Consequently, the promoter’s stake will rise to 51.11 percent from the current 41 percent. The promoters will seek a SEBI exemption from the open offer requirement accordingly.

“Max India, which recently relisted on the Indian bourses on August 28, 2020, after a demerger process has a treasury corpus of over Rs 400 crore created primarily from divestment proceeds of its erstwhile subsidiary, Max Bupa. It intends to utilize up to Rs 92 crore from this corpus for the capital reduction process, while the balance of Rs 300+ crore will be apportioned for growth and other operational expenses,” the company said in a regulatory filing.

The Board of Max India approved the capital reduction exercise earlier today and the proposal will also need to be approved by a special resolution of public shareholders. It will additionally need regulatory approvals including from stock market regulator and NCLT, Mumbai. The approvals process is expected to take about 6-8 months, the company added.

“We had expressed our intent to reward our shareholders at the time we divested our health insurance business Max Bupa. This capital reduction process is a move towards that intent even though capital conservation has become important after the onset of COVID-19 induced economic slowdown. We will still have sufficient growth capital for growth and other expenses,” said Mohit Talwar, Vice Chairman, Max Group & Managing Director, Max India.

The shares of Max India surged over 9 percent after the announcement. At 2:25 pm, the shares were trading 6.05 percent higher at Rs 65.75 on the BSE.

First Published:Sept 15, 2020 2:35 PM IST