Max India, Analjit Singh’s flagship company and majority owner of Max Life insurance and Max Healthcare, has raised Rs 1,000 crore to fund its two core businesses. The company issued 417 million fresh equity shares of Rs 2 each at Rs 240 per share.
“We will use the proceeds to fund the healthcare and insurance businesses for the next 3-4 years,” said B Anantharaman, joint managing director, Max India. After the institutional placement, foreign institutional investors now hold 39 per cent in the company, up from 26 per cent.
Interestingly, 80 per cent of the valuation was given to the insurance business, Max New York Life Insurance. Max India’s economic interest in Max New York Life Insurance was valued at around Rs 4,000 crore, said Pankaj Agrawal, managing director (investment banking) CLSA India, the sole book-runner for the issue.
Although Max India owns 74 per cent in the insurance venture it has a 50 per cent effective interest in Max New York Life Insurance, according to Anantharaman.
This means the insurance venture is valued at Rs 8,000 crore.
Max India has a separate agreement with New York Life Insurance, which allows the US major to increase its holding from 26 per cent to 50 per cent at a predetermined price as and when the government enhances the foreign investment limit for insurance joint ventures.
The price will be the higher of the face value or the embedded value based on an independent actuarial report. “From the beginning, we have an understanding that both partners will have equal stakes as and when the government allows,” said Anantharaman. The current paid-up capital of insurance venture is Rs 800 crore and Max India expects to infuse another Rs 700-800 crore in next five years.