Max Financial share price gains, Axis Bank stock slips; here’s what sales deal means for both

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Published: February 24, 2020 12:29:44 PM

Max Financial Services share price gained more than 7 per cent during the early trading hours on Monday as investors reacted to news of a deal with Axis Bank.

The deal will likely help Max Financial Services sell its insurance products far and wide in India.

Max Financial Services share price gained more than 7 per cent during the early trading hours on Monday as investors reacted to news of a deal with Axis Bank. Max Financial Services and private lender Axis Bank in filing to the market regulator on Thursday disclosed that they had signed a confidentiality and exclusivity arrangement to explore the possibility of the bank entering into a long-term strategic partnership with Max Life. While Max Financial Services, the parent company of Max Life, has seen its share price gain close to 14 per since the speculations of the deal started making the rounds, Axis Bank has slipped 1 per cent.

The deal will likely help Max Financial Services sell its insurance products far and wide in India. “Distribution is key in the insurance business. Them coming together removes a lot of uncertainty for Max, and provides Axis with proficiency in the insurance space as well. Government seems to be making it hard for smaller players and easier for the largest of players in this space. Should be positive for both,” Nikhil Kamat, Co founder, Zerodha told Financial Express Online.

With the deal, Axis Bank is looking to explore the “under-penetrated insurance space”, according to  Amitabh Chaudhary, MD, and CEO of Axis Bank. Meanwhile, the exclusivity agreement with India’s third-largest private bank will address investors concerns on long-term distribution tie-up for Max Financial Services, said Nomura. The brokerage has put a ‘buy’ call on the stock with a target price of Rs 700. Max Financial Services share price was trading at Rs 607 at 12 PM on Monday.

Media reports suggest Axis Bank is looking to acquire a 20 per cent stake in Max Financial Services; however, it was not confirmed by either of the two companies. Axis Bank currently owns 2 per cent in Max Financial. “At the Bank, we constantly keep assessing various strategic opportunities and we see a potential for greater participation in the under-penetrated life insurance space,” said Amitabh Chaudhary.

The agreement between Max Financial Services and Axis Bank is subject to regulatory approval and corporate authorisations as well as satisfactory completion of due diligence. Axis Bank and Max Life have had a successful bancassurance arrangement for nearly a decade. The new premium generated through this arrangement has aggregated to over Rs 12,000 crore over this period, while maintaining high persistency, the press statement noted.

The data from the Insurance Regulatory and Development Authority of India (Irdai) shows that first year premiums for Max Life Insurance for this financial year till January was Rs 4,248.32 crore compared to Rs 3,561.12 crore in previous year, a growth of 19.3%. Market share of Max Life Insurance was at 1.98% as of January in the life insurance industry.  Axis Bank share price was down 1.16 per cent on Monday, trading at Rs 735. On the other hand, Max Financial Service was up by 7.54 per Cent trading at Rs 607.

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