Axis Bank tweaks deal terms, to now buy 17% in Max Life instead of 29%
“Axis Bank now proposes to acquire 17.002% of the equity share capital of Max Life, resulting in total ownership of 18.0% post the transaction,” Axis Bank and Max Financial Services said in an exchange filing.
By ET Bureau | Updated:
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“The parties have executed the definitive agreements. Axis Bank and Max Life will shortly approach the respective regulatory authorities, with revised applications for their consideration and approval,” it added.
MUMBAI: Axis Bank and Max Financial have revised the terms of their proposed joint venture pact involving the latter's life insurance venture. As per the new terms, Axis Bank will acquire 17% stake as against the 29% that was previously agreed upon.
The move comes on the back of regulatory intervention, with both Insurance Regulatory & Development Authority of India (Irda) and the RBI raising concerns over several terms of the deal.
ET was the first report on July 27 that RBI had questioned the lender on the purchase of more than 20% stake in a life insurance venture. The RBI's concerns stemmed from 'spillover risks' for a bank getting into the insurance business, sources told ET.
"We'd like to inform you that following recent developments, Axis Bank now proposes to acquire 17.002% of equity share capital of Max Life, resulting in total ownership of 18.0% post the transaction," Axis and Max Financial said in stock exchange filings.
Second set of changes "The parties have executed the definitive agreements. 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," Monday's filing said.
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This is the second time the terms of the deal are being revised due to regulatory scrutiny. Prior to the RBI expressing concern, Irda had sought clarifications from Analjit Singh-led Max Financial on several clauses of the deal. This included a 'value creation options' clause that allowed the lender to exit the JV at a fixed price if the said options are not consummated within 63 months of closing the deal.
Max Financial and Axis Bank had agreed to make requisite changes to the deal in July.
While RBI's focus was on the risks involved for the private lender rather than how the joint venture pans out, the insurance regulator is extensively looking at compliance and risks for the insurance company, said a person aware of the matter.
On April 28, Axis Bank had announced an agreement to raise its stake in Max Life to 30%, from 1%, in a deal worth Rs 1,592 crore at an agreed price of Rs 28.61 per share. As per the revised terms, Axis Bank's stake in the JV would be at 18%, if the revised proposal is approved by regulatory authorities.
