Shares of Axis Bank and Max Financial ended 2% lower on Thursday after senior BJP leader Subramanian Swamy filed a public interest litigation (PIL) before the Delhi High Court alleging a scam of nearly ₹5,100 crore in Axis Bank-Max Life Insurance deal. Swamy seeks a probe against the deal, alleging that Axis Bank made undue gains of ₹5,100 crore by way of transactions in shares of Max Life Insurance, a subsidiary of the publicly listed Max Financial Services. The court will consider Swamy's plea against Axis Bank on March 13, as per Bar and Bench.

Reacting to the news, Axis Bank shares declined as much as 2.4% to ₹1,068.95, before settling at ₹1,072.60, down 2.11% on the BSE.

In a similar trend, shares of Max Financial Services ended 2.09% lower at ₹948.90 after falling 3% to touch an intraday low of ₹940.05 during the session.

“There was blatant fraud in Max Life Insurance and Max Financial Services allowing their shareholder, Axis Bank Limited and its group companies, Axis Securities Limited and Axis Capital Limited to make undue profits/gains from the purchase and sale of equity shares of Max Life in a non-transparent manner”, Bar and Bench quoted Swamy as saying in his PIL.

Swamy alleged that the transactions violated the mandatory directions of the Insurance Regulatory and Development Authority of India (IRDAI), demanding an investigation by a committee of experts into the matter.

Swamy mentioned in his PIL that Axis Bank group companies acquired 12.002% shareholding in Max Life at ₹31.51-₹32.12 per share for ₹736 crore, which was below the fair market value. “On simple calculation, resulting to make undue profits/gains from the purchase on the sale of equity shares of Max Life in a non-transparent manner, Axis Bank has unlawfully gained approx ₹4,000 crore.”

He further said the insurance regulator IRDAI slapped a fine of ₹3 crore on Max Life for misrepresentation, which is “negligible” compared to the total fraud committed.

In April 2021, Axis Bank and its subsidiaries, including Axis Securities and Axis Capital, together referred to as Axis Entities, had collectively acquired 12.99% of the equity share capital of Max Life at ₹35 apiece, with the right to buy an additional 7% stake in future.

In October 2022, IRDAI asked both parties to revise their “valuation methodology” before they could go ahead with the deal. The insurance regulator also directed Axis Bank to acquire the additional 7% stake in Max Life at "uniform and fair market value". It also imposed ₹3 crore penalty on Max Life Insurance Company for the violations of non-compliance with rules related to the transfer of shares.

The regulator said in the 2021 Axis Bank-Max Life deal, Max Life undertook and facilitated the transactions of transfer of its shares between the parties in violation of its directives, which allowed Axis Bank Ltd and its group companies to make “undue profits”. 

Max Life later said it decided to pay the penalty to pave the way for the future, including strengthening the partnership with Axis Bank and avoiding unnecessary and long legal battles.  

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