Max Financial open to all options with Axis: Rahul Khosla

The ongoing market selloff is no dampener for Max Group President Rahul Khosla. He told ETNow's Nayantara Rai that the fundamentals of the business -- both health and performance indicators -- are actually in a very good state.

Edited excerpts:

Look at your stock price, it is down 40 per cent this year, down from the highs of Rs 600. Why is that the case?

I think there is a big difference. Prices are being driven by sentiment, which I think is what is happening. Obviously, the market is spooked by a lot of macros. Many developments have happened.


But your stock was spooked before the IL&FS scare.

It is not just IL&FS. There were also a lot of macros around oil prices, around inflation, around whole bunch of things, questions around management changes in partner, banks and so on and so forth. I would like to tell you why we believe that the fundamentals of the business -- both health and performance indicators -- are actually in a very good state.

So if you allow me, I will just explain to you what I mean. If you look at some of the health indicators, our conservation ratio is 90 per cent, which means customer stickiness. Our 61st month persistency is 54 per cent, is on the top in the entire private life insurance space. Embedded value has grown more than 20 per cent.

When you say embedded value, I have done a little bit of maths over here. HDFC Life is trading at 4.9 times its embedded value while yours is 1.9 times.

That is the multiple and what I am trying to say is that actually there is no reason why the gap exists. That's because when you look back at the fundamentals of the business and you compare across the industry, when you look at the performance, I am just trying to explain what we said about six months ago. We would do a 20 per cent growth, 20 per cent ROEV, which is return on embedded value, and 20 per cent new business margins in three years. We have achieved that in year one. Now we are aspiring for 25, 25, 25 in all three. Let me just give you some growth numbers...

Let me just first talk about the market’s concerns. The market is also concerned that the person who led you to this kind of growth and build this business was Rajesh Sud, who is now leaving the company. You have promoted someone in-house, someone who was involved in the front but there are concerns about the future of the management at Max Financial and one of the reasons analysts believe why you are being punished by the markets as well. How would you address this market concern because the person who drove this company has left?

So, one individual does not drive the company. I am very proud to say that the team that has supported Rajesh including shareholders and his team are very strong that has been actually one of the hallmarks of the team.

Look around yourself. HDFC Life internal succession. ICICI Prudential internal succession. We have also done an internal succession and two people who are MD and DMD together have almost three decades of experience in the company, not just life insurance.

The team itself is extremely strong which is supporting them. So from my perspective, the fundamentals of the business are not just because one person has done it or I have done it or he has done it.

Second, there is no fractiousness with respect to this parting. I think renewal was also required by the company, by himself. Eighteen years have been fantastic. So no one is denying that it has been a great run, but I think moving forward to my mind, the inherent strength of the company and the strength of the team is going to be carried forward.

Is the deal with HDFC Life over?

Yes.

Is it done and dusted?

Yes.

No questions of that coming back?

No. There is nothing on the table either with that or anything else at the moment. You know we walked away last year because we just felt that the conditions were not correct for us to commit to that kind of value, but nothing else is on the table at the moment. For us, a distribution-led opportunity any time would be something that we would obviously scout for because that would be the strategic reason.

Anything on the table right now?

No.

You have a great relationship with Amitabh Chaudhry. He is now going to Axis. Max Financials has a great relationship with Axis. There is a bancassurance agreement. Would the markets be wrong in doing one plus one equals to three and a bigger deal with Axis?

All blessings to the market if good things happen. Look, first of all let me just say Amitabh is a very smart guy, very very smart, very intelligent, very rational. He is going to do exactly what is right for Axis. Let me also tell you our growth year to date with Axis has been 24 per cent and that is not small relative to the market. We have probably the gold standard in bancassurance relationship with them for last 10 years. So, this is a very valuable relationship for both parties.

But could it be more than bancassurance?

We will see. Let him join. We will have a nice conversation around what is possible and look at that point the rationality of it will come out because we know the rhythm of Axis backwards, they know our rhythm backwards for the last 10 years and you look around, benchmark it with bancassurance performance anywhere else, you will find that this is pretty much the gold standard.