Reserve Bank of India has refused to consider the direct acquisition of a 17 percent stake in Max Life Insurance by Axis Bank.
The lender in its statement to exchanges said the Reserve Bank of India has advised Axis Bank that its application for the direct acquisition of 17.002 percent has not been considered.
Axis Bank and Max Financial Services, on April 28, announced the signing of a definitive agreement to become joint venture partners in Max Life Insurance. Under the plan, Axis Bank was to acquire a 29 percent stake in Max Life Insurance to hold a total 30 percent stake in the insurer.
On August 24, Axis Bank announced changing the deal structure under which it decided to reduce the size of its acquisition in Max Life Insurance to 17 percent from 29 percent earlier.
Now, what would be the second change in the deal structure, Axis Bank has said that Axis entities which include Axis Bank, Axis Capital, and Axis Securities will together acquire approximately 19 percent stake in Max Life Insurance.
As far as individual companies under Axis entities are concerned, out if the total 19 percent stake, Axis Bank will be acquiring a 9 percent stake, Axis Securities and Axis Capital together would be acquiring a 3 percent stake in Max Life Insurance.
Also, Axis entities will have the right to acquire up to a 7 percent stake in Max Life Insurance going forward. The revised structure according to Axis Bank is guided by Para 5(b) of Master Direction- Reserve Bank of India. Under Para 5(b) of Master Direction, an entity does not require RBI approval for an acquisition involving less than 10 percent of the investee company’s paid-up capital.
As per stated regulations, Axis Bank may not require any approval from RBI to acquire a 9 percent stake in Max Life Insurance. The same directions would also restrict Axis Bank to acquire more than 10 percent stake in Max Life Insurance. This means the balance 7 percent stake in Max Life Insurance will have to be acquired by the other two companies under Axis entities ie Axis Securities and Axis Capital.
