Becoming one of the first companies in India to benefit from the proposed increased limit for FDI in insurance, Bupa, the international healthcare group, on Monday announced to hike its stake in Max Bupa from 26 percent to 49 percent.
Private health insurer Max Bupa is a joint venture between Max India, which owns 74 percent of Max Bupa, and Bupa, the UK-headquartered global healthcare group, which has 26 percent stake.
In an interview to CNBC-TV18, Nidhesh Jain, analyst at Espirito Santo shares his perspective on Bupa raising its stake in Max Bupa and how it affects the companies involved hereon.
Below is the verbatim transcript of the interview:
Q: Right now it is just preliminary agency reports, we don’t have any confirmation on this news at this point in time but what was the likelihood of this taking place that maybe Bupa would be looking to increase their stake to 49 percent in Max Bupa?
A: Max Bupa has already said that they were interested. They have historically said that they have been interested in increasing their stake to 50 percent in Max Bupa and it is most likely that they will increase their stake to 49 percent.
Ekta: What are the valuations that you think will take place with regards to this considering the recent Azim Premji HDFC deal that we saw go through and what would your target price be on Max India?
A: In the Azim Premji deal, the deal has happened at almost around 2.5 times EV. However, here the insurance business is different, Max Bupa is a health insurance company. As we understand Bupa has Call option to increase their stake on which Max India has been earning their Call option premium. So, most likely the deal will happen at one time capital infused in case of Max Bupa. The positive impact of the deal is that incrementally Max India may not need to infuse capital in Max Bupa.
Reema: Do you think Bupa will do increase the stake with just the ordinance in place or will they wait for it to become a law before upping the stake?
A: Technically they can go through ordinance way only but I think the entire process will take at least two to three months and then post that we will get much more clarity. So, technically they can increase their stake through ordinance way but it will take at least two to three months.
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