The joint venture deal was announced in April wherein Axis Bank was to raise its stake in Max Life from 1% to 30% for ₹1,592 crore at ₹28.61 a share. Analjit Singh promoted Max Financial holds 73.5% in Max Life, Japan based company.
In June, the Insurance Regulatory and Development Authority of India (IRDAI) raised concerns over four clauses in the merger agreement.
“Max Life and Axis have made significant alterations in their proposed JV agreement to secure regulatory approvals and expedite closure of the deal. Max Life and Axis Bank have erased some key clauses in their agreement in order to convince IRDAI,” said one of the sources.
A clause to list Max Life by merging it with listed parent Max Financial Services has been removed. This would have violated Section 35 of the Insurance Act, 1938, under which an insurance company’s business cannot be merged into the business of a non-insurance firm.
“With this clause being deleted, Axis will have to rethink its plan to swap up its holdings from Max Life to Max Financial Services. Also, Axis Bank will now have to revisit its plan to exercise the “put” option in the agreement at a price of ₹294 per share of Max Life. This is because it was mentioned in the agreement that if Max Life fails to get listed, Axis would have the option to swap its holding and exercise the put option after 63 months of the deal being cleared by the regulators,” said the source.
Recently, Bharti AXA and ICICI Lombard has announced merger in the general insurance business. Read here.
