IRDAI asks SEBI to look into Axis Bank-Max Life deal

On October 13, 2022, IRDAI had fined Max Life Rs 3 crore after investigating the transfer of its shares to Axis entities in March 2021.

The Insurance Regulatory and Development Authority of India (IRDAI) has written to the Securities and Exchange Board of India (SEBI) to examine Axis Bank-Max Life Insurance deal, CNBC-TV18 reported on August 31.  Max Life Insurance is a subsidiary of Max Financial Services.

The insurance regulator has asked SEBI to investigate if there were violations in determining the fair market value of Max Life Insurance shares.

According to CNBC-TV18, so far, only IRDAI was investigating the share transfers done in March 2021 and imposed a fine as well but now the regulator has roped in SEBI as well.

Moneycontrol couldn't verify the report independently.

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This development comes after Axis Bank in an August 9 filing said its board approved raising its stake in the life insurer from 9.9 percent to 16.22 percent, taking the collective stake of Axis entities to 19.02 percent.

The bank would infuse Rs 1,612 crore in Max Life to acquire 14.25 crore shares at Rs 113.06 apiece, a premium of Rs 103.06 a share over the face value of Rs 10 each, it said.

The filing said the objective of the acquisition was to strengthen the bank’s position in the life insurance business.

IRDAI crackdown 

On October 13, 2022, IRDAI fined Max Life Rs 3 crore after investigating the transfer of shares to Axis entities in March 2021.

Its investigations showed that Axis Bank on March 15 and 16, 2021 sold shares to Max Financial Service Limited (MFSL) and Mitsui Sumitomo International (MFI) for Rs 166 each. Ten or 11 days later, the shares were bought by Axis entities (Axis Capital, Axis Securities and Axis Bank) from MFSL and MFI for prices between Rs 31.5 and Rs 32.12.

As the IRDAI order pointed out “same equity share is valued differently based on whether Axis Bank is buyer or seller”.

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The order said, “The transfer of shares was not done at fair market value determined on a uniform basis, which led to Axis Bank, a registered Corporate Agent of the Insurer along with its group companies, receiving undue monetary gain of significant amounts from such buy/sale of equity shares”.

On October 13, 2022, IRDAI fined Axis Bank Rs 2 crore for not complying with its orders and for making undue gains of substantial amounts through the transaction of these shares.