Shares of Max Financial Services Limited (MFSL) surged nearly 6% in early deals on Monday after it received approval from the Insurance Regulatory and Development Authority of India (IRDAI) to acquire residual stake in Max Life Insurance Company Limited (Max Life). MFSL, which owns 81.83% majority stake in Max Life, will purchase the remaining 5.17% stake held by Japan-based Mitsui Sumitomo Company Limited. The deal is expected to be complete in the next fortnight.
This transaction involves the purchase of 9.91 crore shares of Max Life at ₹85 per share by MFSL, the parent company of Max Life, as per the Put/Call option approved by the MFSL board in March 2020 and subsequently by its shareholders in May 2020.
Following the announcement, Max Financial share price jumped 5.6% to hit an intraday high of ₹702.45 on the BSE. Earlier today, the stock opened at ₹680.05 against Friday’s closing price of ₹665.05 on the BSE, taking its market capitalisation (m-cap) to ₹23,802 crore. In comparison, the BSE Sensex was trading 215 points higher at 62,508 levels at the time of reporting.
The largecap stock has seen selling pressure in the recent past, with the share price hitting a 52-week low of ₹627.80 on November 23, 2022. MFSL shares currently trade 35% lower than its 52-week high of ₹1,081 touched on January 11, 2022. The stock has fallen 32% in the calendar year 2022, while it has shed nearly 11% in the past six months. In the last one month, the insurance stock has lost nearly 2%.
Commenting on the development, Analjit Singh, chairman, Max Group, said, “We thank IRDAI for this approval. The transaction will make the holding company structure simpler and help consolidate our shareholding in Max Life which will benefit all our shareholders by attracting more investor interest.”
Max Financial Services, a part of $4 billion Max Group, is focused on the life insurance business and actively manages nearly 82% stake in Max Life Insurance, one of the country’s leading private life insurance companies. Post completion of the deal, MFSL's shareholding in Max Life will increase to 87%.
Earlier, MFSL owned a 72.52% stake in Max Life and Mitsui Sumitomo Company Limited (MSI) had 25.48% shareholding. In December 2020, MFSL entered into a share swap transaction with MSI, swapping 20.57% of the paid-up equity share capital in Max Life held by MSI in exchange for 21.87% of the issued and paid-up share capital of MFSL. In March 2021, MSI acquired 0.26% stake from Axis Bank, as a result MSI’s stake in Max Life increased to 5.17%. Subsequently, MFSL was awaiting this approval from IRDAI for the transfer of the balance stake of 5.17% held by MSI.