Axis Bank (AXSB), Max Financial (MAXF) and Max Life Insurance have entered into an exclusive arrangement to explore a long-term strategic partnership, subject to all regulatory approvals. Axis Bank and Max Life already have a successful bancassurance (banca) arrangement for nearly a decade. AXSB has accounted for 55-60% of total individual APE for Max Life over the past several years. This has enabled Max Life to emerge as a leading life insurance company in a space dominated by insurers promoted either by banks or NBFCs.
AXSB has been looking to enter the life insurance business as a manufacturer for some time and consummation of this deal will boost the symbiotic relationship between the two entities. AXSB’s MD & CEO Amitabh Chaudhry has a long and proven track record in building insurance business and his experience will come useful in scaling up the insurance franchise.
While the deal contours are yet to be finalised, the long-term tie-up with AXSB as a banca partner will remove an important overhang on MAXF and help it close the valuation gap with peers. AXSB will also benefit as it gets a large stake in a strong insurance franchise and benefits from the potential business rerating. MAXF is already a strong insurance franchise but trading at a meaningful discount to peers. The clarity on distribution and promoter shareholding can help rerate the stock significantly. AXSB, on the other hand, will look to strengthen its subs profile with a stake in the life insurance venture. While the overall value creation for AXSB is contingent on the performance of core bank, the SOTP story is evolving well as it can potentially contribute 8-10% of total valuation. Maintain ‘buy’ with a target price of Rs 860.
Consummation of the deal between ASXB and Max will allow it to expand its footprint into life insurance wherein it will own a significant stake v/s the 2% currently. This will boost symbiotic relationship between the two entities. Axis Bank’s MD & CEO Chaudhry has earlier successfully headed HDFC Life for almost a decade. We believe that the strategic partnership, AXSB’s vast distribution potential and management capability will come useful in further scaling up the insurance franchise.