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Max Financial approves proposals from KKR, Standard Chartered and TPG to acquire Max Life

Max Financial Services’ board approves proposals received from the shareholders like KKR, Standard Chartered Bank and TPG Global LLC to pursue the acquisition of the residual stake in Max Life.
Max Financial Services’ board approves proposals received from shareholders like KKR, Standard Chartered Bank and TPG Global LLC to pursue the acquisition of Max Life.

The board of directors of Max Financial, on March 21, 2018, approved availing borrowing for an amount aggregating up to Rs5,000cr. This is to part finance the amount required for pursuing acquisition of remaining stake in Max Life Insurance, subsidiary of the company.

The various fundraising proposals received by the company are subject to
• execution of definitive documents between the company and the relevant investors;
• completion of various conditions agreed between the company and investors; and
• receipt of requisite approvals, in each case, on terms and conditions satisfactory to the investors. The exact quantum of fundraising by the company will be within the overall limits approved by the board earlier and will be finalized once the acquisition opportunity materializes.

Max Financial Services is the holding company of Max Life Insurance Company Limited, India’s largest non-bank owned private life insurer. Its Gross Written Premium (GWP) witnessed CAGR of 13% over FY13-17. It has balanced product mix with a focus on long-term saving and protection contribution (Par Life ~47% of 9MFY18 GWP and ULIP ~40% of 9MFY18 GWP). We expect GWP and PAT CAGR of 11% and 10.5% respectively over FY18-20E.

Max Life has a market share of ~8% (9MFY18) in private life insurance space in India. It ranked 4th in terms of individual new business premium amongst private players. The AUM of the company was at Rs50,333cr as on December 31, 2017.

Max Life has a product distribution channel with consistent contribution from proprietary channels and strong bancassurance relationships (~31% proprietary and ~56% bancassurance tie-up with Axis Bank in 9MFY18). The company is also expanding its network through digital channel to fulfill growth in ‘direct to customer’ sales. It had individual adjusted premium equivalent CAGR of 14% over FY14-17. Considering the above parameters, we expect GWP CAGR of 11% over FY18-20E. The solvency ratio for the company as on December 31, 2017, stood at 280%.

The stock of Max Financial Services is trading at Rs461.30, up by 1.26% or Rs5.75, on BSE at 9.19am.