Max India expects Rs 516cr from Max Healthcare stake sale

During the second quarter FY12, Max India's net sales were up 16% at Rs 1,806 crore versus Rs 1,556 crore (YoY) and the profit after tax (PAT) was at Rs 58 crore versus loss of Rs 96 crore (YoY).

Deputy managing director Mohit Talwar mentioned that profits for the life insurance business have increased 8 times and assets under managements (AUMs) for the life insurance business has increased 20%.

Talwar expects Rs 516 crore from the Max Healthcare stake sale. He also stated that the liquidity position of Max group is very healthy.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: Could you take us through various segments of Max India and the performance contribution from each segment?

A: It has been a very encouraging quarter and H1. For the first time, the group has been significantly profitable, largely on account of the robust performance of the life insurance business, where the profits have increased more than 8 times.

There has also been healthy increase of about 20% in the assets under management. A transition has taken place in terms of the product profile, where we are now selling about 85% long-term savings and protection. Currently, the treasury corpus in Max India stands at about Rs 450 crore.

There is a likelihood of a healthcare deal with Life Healthcare of South Africa. We are at a diligence stage right now, but if it crystallises, we are looking at Rs 516 crore of primary money coming into Max Healthcare.

The liquidity position of Max Group is very healthy. The generated profits have been significant. The businesses are fully funded. Our other businesses liker Max Bupa and Plastics continue to do well.

Max Bupa has already reached 100,000 levels of lives, which is significant for an 18 months old operation. Our old warhorse, which is the plastic business, continues to do well as it has for all these years.

Q: What has happened with the new business premium? How has that fared this quarter?

A: As far as the new business premium is concerned, there has been a de-growth in the market in the region of - 40%. We are down about -18 %, which has resulted in our market share going up to somewhere close to 10%. In terms of ranking, we are number four right now or sometimes number three.

Q: How would the insurance side of things pan out for the rest of this year? What would be the rough run rate that you hope to achieve on that business in particular?

A: This year will largely be negative. We generally do better than the private market. We would see a flattish kind of growth. Going forward, we anticipate a CAGR in the region of 17-20%.

The headwinds that hit last year have revamped the private market business models. We might see a turnaround in the growth. The private market is likely to grow in the region of 10-15% going forward.

Q: What is the state of your balance sheet right now? What is your current debt? Do you have plans to pare some of it down?

A: Once the Life Healthcare deal crystallises, apart from what the hospital business needs, about Rs 150 crore will be for the expansion. The debt that will be retired would be in the region of about Rs 200-250 crore, which will bring debt equity ratio to the level of about 1:1.