Mitsui Sumitomo picks up 26% stake in Max New York Life, Max India makes Rs 800 cr gains

NEW DELHI: Mitsui Sumitomo has picked up 26% stake in Max New York Life Insurance Company Ltd for around Rs 2,731 crore, valuing the Indian insurance venture at Rs 10,506 crore. New York Life Insurance, the current foreign shareholder has completely exited from the JV.

The transaction will give a windfall gain of over Rs 802 crore to Delhi based Max India, a flagship company of Analjit Singh group that controls Max Healthcare, a hospital chain company, and Max Bupa Health Insurance. Max India will continue to own nearly 70% stake in the JV after the induction of new partner.

The two-stage transaction valued the Max New York Life Insurance, a 74-26 joint venture between Max India and the US based New York Life Insurance at Rs 10,506 crore, the second highest valuation of a life insurance company in the private sector.

A year back, Reliance Capital, an Anil Ambani group company divested 26% stake in Reliance Life Insurance to Japanese insurance behemoth Nippon Life Insurance for Rs 3,062 crore, valuing the company at Rs 11,500 crore.

Marking an exit after nearly 10 years, New York Life Insurance made handsome gain of over 300% on its investment of around Rs 505 crore towards its 26% stake in the JV that has a capital base of around Rs 1,929.5 crore. The transaction involves divestment of 16.63% stake directly to Mitsui Sumitomo Insurance Corporation for Rs 1,747 crore and balance 9.37% stake was sold to Indian partner Max India for Rs 182.26 crore.

Indian law restricts foreign investment in insurance companies to 26 percent.

Max India, that has right of first refusal bought 9.37% stake from New York Life Insurance at par for Rs 182.26 crore. Subsequently, it divested the same number of shares to the new Japanese partner for Rs 984.45 crore. At this price, Max New Life Insurance Company is being valued at Rs 10,506 crore. The transaction gave a windfall gain of Rs 802.22 crore to Max India.

In a disclosure to the stock exchanges, Max India Ltd has said that Mitsui Sumitomo Insurance Company Limited, Japan (MSI) is acquiring, subject to required approvals and permissions, 26% stake in Max New York Life Insurance Company Limited (MNYL).

Max India and Mitsui Sumitomo have entered into a shareholder agreement today, which would become effective on consummation of aforesaid transactions, the disclosure says.

Mitsui Sumitomo Insurance has already entered India's non-life insurance market through a joint venture and will consider sharing the sales network with the life insurance operations.
Shares of Max India were trading at Rs 203.50 on the BSE up 8.1%.