IRDAI directs Max Life to rejig Axis Bank deal

IRDAI has sent communication to Axis Bank and Max Financial Services, which entered into an agreement in April whereby the lender would have increased its stake in life insurance company Max Life promoted by Max Financial Services, to make some changes to the value creation options that the two firms were exploring. IRDAI has asked them to factor in some alternate mechanisms subject to regulatory approvals.
In an exchange filing, Max Financial said, “Earlier, Axis Bank and Max Financial had agreed to certain value creation options and related rights. Based on correspondence from IRDAI received by the firm, Axis Bank and the company have agreed to make some changes to the value creation options and factor in some alternate mechanisms subject to regulatory approvals and as maybe permitted under applicable law.” Axis Bank also made a similar statement to the exchanges.
According to sources, there’s a clause in the deal that says that after a little over five years, the entity will go for a listing on the bourses. However, if the listing does not happen, Axis Bank would swap the unlisted Max Life’s 30 per cent holding with the listed entity Max Financial Services, depending on the swap ratio. Further, if even that is not possible, then Axis Bank would have a put option to sell its shares in Max Life at a pre-determined price to Max Financial. IRDAI has raised objections to these options included in the deal, said a source, adding there would tweaks to this part.