Max India in talks with PE firms to sell 22% stake in Max Life Insurance

MUMBAI: Analjit Singh-promoted Max India is in talks with four private equity firms for the sale of a 22 per cent stake in Max Life Insurance, two people familiar with the plan said.

“The stake sale could fetch about Rs 4,000 crore, which would value the company at anywhere from Rs 16,000 crore to Rs 18,000 crore,” a person close to the development said. It is learnt that private equity firms TPG, Carlyle Group, Blackstone Group and Apollo have been approached. Max India currently holds about 70 per cent in the company. Axis Bank holds about 4 per cent, while Japan’s Mitsui Sumitomo Insurance holds the remaining 26 per cent in Max Life.

The government passed the insurance bill in March, increasing the foreign direct investment limit in the sector to 49 per cent from 26 per cent. Industry estimates suggest that as much as Rs 22,000 crore could be invested in insurance companies through the FDI route in the next five years. If the transaction goes through, the combined stake held by the incoming private equity firms and Mitsui Sumitomo in Max Life would be about 48-49 per cent.

Emails sent to Max Life, Carlyle and Apollo did not elicit any response. TPG and Blackstone said they “do not comment on market speculation.” Max Life said in May that its embedded value stands at Rs 5,232 crore. Embedded value is the adjusted net asset value plus the current value of future profits, a measure of valuation for an insurance company.



“If we take the deals in the insurance space that have happened in the last couple of years, Indian insurance companies are valued at anywhere between 3.1 to 3.5 times the embedded value,” another person close to the development said. In April 2012, Mitsui Sumitomo had bought a 26 per cent stake in Max New York Life Insurance, a joint venture between USbased New York Life Insurance and Max India, for Rs 2,731 crore. Mitsui Sumitomo paid about 3.5 times the embedded value of the insurance firm to buy out New York Life’s stake at that time.

Max India has proposed to be restructured into three listed entities. The entities — Max Financial Services, Max India and Max Venture and Industries — will operate in life insurance, health business and manufacturing, respectively.