Nippon AMC begins liquidation of Max Financial stake

Max Financial Services (MFS), a part of the Max Group, is likely to feel pressure on its valuations as Japanese asset management firm Nippon AMC has started liquidating it’s stake, a big negative for its promoter struggling to maintain its status.

Nippon AMC informed exchanges of selling stake in MFS – the holding company for Max Life.

Of the total 95,83,248 shares or 3.55% of MSL’s total share capital, Nippon AMC sold 2,89,200 share on Tuesday. Through this sell Nippon raised nearly Rs 13.50 crore.

MFS promoter Analjit Singh holds 28.3% stake in the company. Other marquee shareholders include KKR, New York Life, Baron, Vanguard, Blackrock, Aberdeen, First Voyager, Jupiter, Dimension, East Spring and the Asset Management Companies of Nippon, HDFC, ICICI Prudential, Aditya Birla Sun Life, Mirae, BNP, DSP and Sundaram.

Last year, Singh decided to sell a 10% stake in MFS, the holding company for Max Life Insurance, to raise as much as Rs 1,200 crore aimed at deleveraging.

This would have allowed promoters to consolidate stake in Max Life Insurance to over 97% from 71.79% currently through a share swap with Japan’s Mitsubishi Sumitomo Insurance Co. Ltd., the insurer’s joint venture partner.

As a part of an agreement Mitsui Sumitomo will exchange its 26.12% stake in Max Life Insurance for a 21.45% holding in MFS and cash of about Rs 815 crore. Mitsui Sumitomo will become a public shareholder in MFS and exit as joint venture partner in the insurance company.

However, MFS promoters have pledged about 80% of their current ownership of around 28.3%, which is one of the major factors that affect its share price.

The share swap agreement requires Singh and his family to retain a minimum 10% stake to remain promoter of MFS.

MFS and Max Life Insurance had entered into an agreement for a three-way merger with HDFC Life in June 2016. However, the deal was vetoed by the regulator a year later.

Recently, MFS reported a steep 96% plunge in consolidated profit after tax to Rs 6.67 crore for the January-March quarter 2020 due to the impact of a tax dispute settlement and the coronavirus pandemic.

The company had registered a profit after tax of Rs 199.91 crore during the January-March quarter of the previous fiscal year.

Income during the March quarter of 2019-20 also fell by 40% to Rs 4,265.64 crore as against Rs 7,136.98 crore in same period of 2018-19.

For the full 2019-20 year, the profit after tax was down by 34.5% to Rs 272.85 crore from Rs 416.46 crore in the fiscal ended March 2019.

Income was down to Rs 18,241.76 crore in 2019-20 against Rs 19,513.26 crore in the previous fiscal.

During the quarter ended March 2020, MFS also announced that Axis Bank will acquire 29% stake in Max Life (subsidiary) and post completion of series of transactions Max Life will be a 70:30 joint venture between the company and the private sector lender.

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