Max Financial shares jump 10%, Axis Bank rises around 4% as Irdai approves acquisition of stake



Shares of Max Financial and Axis Bank surged Thursday after the Indian Insurance Regulatory and Development Authority (IRDAI) approved Axis’ acquisition of up to 12% stake in Max Life Insurance Bank and its subsidiaries.

Shares of Max Financial Services were stuck in a circuit 10% higher at Rs 938.65 per share on the NSE, which was also its highest in 52 weeks. Meanwhile, Axis Bank rose 3.7% to its highest daily level of Rs 776.90 per share.

In accordance with the proposed transaction, the Axis entities have the right to acquire up to 19% of the capital of Max Life. Of this amount, Axis Bank proposes to acquire up to 9 percent, and Axis Capital Limited and Axis Securities Limited together propose to acquire up to 3 percent in the first stage of the transaction for an amount of 12 percent .

Axis Entities have the right to acquire an additional stake of up to 7% in Max Life over the next few years.

Brokerages remained bullish on both stocks after the acquisition of the stake was approved. While Morgan Stanley is “overweight” on Axis Bank, CLSA and Jefferies have “buy” calls on Max Financial.

“IRDAI nod to Max deal removes distribution surplus. Axis JV may help structural improvement in growth prospects and VNB margin,” CLSA said in a report adding that Max is his first choice in space.

Jefferies raised earnings estimates for Max after the deal and said the visibility of the deal could support a re-rating. He upgraded the stock to “buy” and raised the target to Rs 1,000 per share.

In January of this year, the Indian Competition Commission (ICC) approved the acquisition of the stake.

In October 2020, the Reserve Bank of India (RBI) rejected Axis Bank’s initial proposal to increase the stake to 29% and reduced it to a total of 19.02%.

The private sector lender was planning to buy a 29% stake in the insurer, but changes had to be made to the agreement following communication with IRDAI.

Analjit Singh, President of Max Group and Max Financial Services, said, “We have been looking forward to bringing Axis Bank into this build as a joint venture partner in Max Life. I have no doubts that this joint venture will strengthen our position as a leading leader. in the Indian life insurance sector which is showing clear signs of rapid and sustainable growth. “



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