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RBI refuses to consider direct acquisition of 17% stake by Axis Bank in Max Life

RBI advises Axis Bank to restructure Axis Bank-Max Life deal

October 30, 2020 / 05:06 PM IST
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Private sector lender Axis Bank on Friday said the lender and its subsidiaries have agreed to enter into revised agreements with Max Financial for acquisition of up to 19.002 per cent of the equity share capital of Max Life.

Under this, Axis Bank's total stake in MLI will remain within the limits stipulated under the applicable laws and regulations.

Under the Revised Agreements, Axis Bank will acquire upto 9.002 per cent of the equity share capital of Max Life, and, Axis Capital Limited and Axis Securities Limited will together acquire upto 3 per cent of the share capital of Max Life.

In addition, Axis Entities will have a right to acquire an additional stake of upto 7 per cent of the equity share capital of Max Life, in one or more tranches, in accordance with existing laws and regulations the bank said.

The Revised Agreements will supersede the previous agreements entered into between the parties, the bank said.

The initial plan was for Axis Bank to acquire up to 29 percent in Max Life. But, Axis Bank on August 24 reduced this and proposed to acquire 17 percent share in Max Life.

"...Axis Bank now proposes to acquire 17 percent of the equity share capital of Max Life, resulting in total ownership of 18 percent post the transaction. The parties have executed the definitive agreements," the company said in a BSE filing then.

Axis Bank and Max Life will shortly approach the respective regulatory authorities, with revised applications for their consideration and approval. The transaction is subject to regulatory approvals, the regulatory filing further added.

Initially when Axis Bank and Max Life had approached the insurance regulator (Insurance Regulatory and Development Authority of India) for a nod to the deal, IRDAI is said to have advised some changes in the deal. This includes the 'value creation options' proposed in the deal.


In the original deal structure announced in April, both entities have announced a six to nine month time limit for the transaction to be completed.

In the original deal, the long-term intent of the partnership was to merge Max Financial Services (MFS) with Max Life. However, insurance regulatory rules state a non-insurance company cannot merge with an insurance company. This was used as the reason to reject the merger between HDFC Life and Max Life.

In the April deal structure, Axis Bank and Max Life had also agreed that if the value creation options are not completed within 63 months from the closing, the transaction provides for a put option for Axis Bank. The insurance regulator is said to have sought clarity on these options.

Also, as per this put option, there can be a sale of all shares held by Axis Bank in Max Life at a price of Rs 294 per share (subject to adjustments) within nine months of exercise of such put option.

Post this, Axis Bank announced in July 2020 that it is making some changes to the deal structure.

This deal was an outcome of the discussions after Axis Bank, Max Financial and Max Life had signed a confidentiality and exclusivity arrangement on Feb 20, 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life.

The two companies have had a business relationship for over a decade, providing long term saving and protection products to over 1.9 million customers.
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Tags: #Axis Bank
first published: Oct 30, 2020 04:29 pm
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