Under the leadership of a new managing director and chief executive officer Amitabh Chaudhry, Axis Bank has acquired an additional 29 per cent stake Max Life Insurance, taking the latter’s value at over Rs 5,000 crore.

With this addition, the private lender now holds a total of 30 per cent of the insurer’s stake.

Previously, Axis Bank held about 1 per cent stake in Max Life. The lender is the biggest banking channel partner for distribution of insurer’s products. Products sold through the bank reportedly contribute for 54 per cent of Max Life’s revenues.

The boards of Axis Bank, MFS and Max Life approved the transaction late on April 27, a joint statement said on Tuesday.

“This is an outcome of the inter-se discussions after the three companies had signed a confidentiality and exclusivity arrangement on February 20, 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life,” it said.

It is worth noting that the deal comes at a time when Indian economy is going through a hard time, which is caused by the COVID-19 pandemic.

It is to be seen how the sectoral regulators including the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI) deal with the proposed transaction in these difficult times.

MFS holds 72.5 per cent stake in Max Life and Japan-based Mitsui Sumitomo Insurance (MSI) owns 25.5 per cent stake.

“The joint venture arrangement will significantly improve Max Life’s position vis-a-vis its competitors, including the other large banks owned life insurers,” it said.

“The development will result in a mutually beneficial and enduring relationship between Axis Bank and Max Life and bring the stability of a long term partnership to India’s fourth largest private life insurance franchise,” it added.

The proposed transaction with Axis Bank follows the ongoing swapping by MSI of 20.6 per cent stake that it holds in Max Life with a 21.9 per cent stake in MFS, it added.

“MFS also plans to purchase MSI’s balance stake in Max Life. Post completion of the series of transactions, Max Life will become a 70:30 joint venture between MFS and Axis Bank” the statement said.

“The proposed transactions are subject to approval of requisite corporate and regulatory authorities including IRDAI, RBI and the Competition Commission of India,” it added.

The two companies have had a successful business relationship for over a decade, providing long term saving and protection products to over 19 lakh customers, it said.

The total premium generated through this relationship has aggregated to over Rs 38,000 crore, it said, adding, both companies have invested extensively in product and need-based sales training, thereby leading to consistent increase in productivity.

It is to be noted that Max Life had made an attempt to merge with HDFC Life in 2017, but the deal failed to go through as the two sides did not receive a regulatory approval due to reported complexity of the deal. Following failure of the deal, Max Group made several attempts to sell part of its stake. However, it did not meet success.

Interestingly, the deal was then brokered by the then HDFC Life CEO Amitabh Chaudhry who currently heads Axis Bank.

Announcing the transaction, Axis Bank CEO Amitabh Chaudhry said, We continue to believe in the long-term prospects of India’s under-penetrated life insurance space, current environment notwithstanding. We see this joint venture creating immense value for our stakeholders given our long-standing, high performing partnership with Max Life.”

This transaction will help deepen working relationship leading to better-integrated teams and infrastructure and a superior alignment in approach, he added.

Max Group founder and Chairman Analjit Singh said, “I believe that in Axis, we have found an exceptional partner and we have conviction that this will make Max Life fundamentally stronger, better performing and will bring stability to the franchise. We will run the organization as if it’s an equal partnership, a philosophy which has held us in good stead earlier as well.”