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Max Financial Services zooms 6% as over 10 mn shares change hands

Till 10:05 AM, a combined 13.49 million shares had changed hands on the counter on the BSE and NSE, representing nearly 4 per cent of the company's equity

With most negatives priced in, worst seems over for Max Financial investors

SI Reporter New Delhi

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Shares of Max Financial Services surged 6.3 per cent to Rs 937.5 apiece on the BSE in Thursday's intraday trade after over 10 million shares changed hands on the counter.

Till 10:05 AM, a combined 13.49 million shares had changed hands on the counter on the BSE and NSE, representing nearly 4 per cent of the company's equity. The names of the buyers and sellers couldn't be ascertained immediately.  

The shares were ruling 3.5 per cent higher at Rs 912.3 per share as against 0.56 per cent rise in the benchmark S&P BSE Sensex. 

On August 9, Axis Bank, along with its subsidiaries, had announced that it would acquire the remaining 7 per cent stake in Max Life Insurance.

"The Acquisitions, Divestments and Merger Committee of the Board of Directors of the Bank at their meeting held on August 9, 2023 has approved the proposal for the Axis Bank to infuse Rs. 1,612 crores in Max Life through preferential allotment, resulting in Axis Bank's direct stake in Max Life increasing to 16.22 per cent and the collective stake of Axis Entities increasing to 19.02 per cent from 12 per cent," the bank had said in an exchange filing.

The acquisition price was fixed at Rs 113.06 per share for the stake, up from the initial acquisition price of Rs 32 per share for the first 12 per cent stake. 

Since then, the stock of Max Financial, which is the parent company of Max Life Insurance, has increased 11.5 per cent on the BSE as against 0.8 per cent dip in the benchmark Sensex index. 

"After the Axis Bank deal, the solvency margin is expected to increase by 39 per cent, providing ample capital for future growth. Although growth has been muted within the Axis Bank channel, the counter share has not declined for Max Life," noted analysts at Motilal Oswal Financial Services.

In the April-June quarter (Q1) of FY24, Max Financial Services reported 19 per cent year-on-year (YoY) consolidated revenue growth to Rs 4,730 crore, while consolidated net profit jumped 48 per cent annually to Rs 101 crore on account of higher investment income, said the company.
Its new business premium grew 25 per cent to Rs 1,857 crore during the April-June period, and the Annualised Premium Equivalent (APE) rose 10 per cent to Rs 1,113 crore driven by strong growth in proprietary channels.

The healthy trend in total APE, driven by strong traction in all segments, except unired linked insurance plans (ULIPs). Overall, the share of ULIPs moderated, while the mix of Non-PAR improved. 

The Banca channel witnessed a muted performance, while the proprietary channel maintained strong trends. Value of new business (VNB) margin remained healthy at 22.2 per cent, led by improved product profitability. Persistency trends were stable. 

"Axis Bank's stake increase will support the solvency, which stood at 188 per cent in Q1-FY24. We estimate 13 per cent APE CAGR over FY23-25, thus driving 10 per cent VNB CAGR. We reiterate our 'Neutral' stance with a revised target price of Rs 900 premised on 2.0x Mar'25E EV and a holding company discount of 20 per cent," MOFSL said.

Those at Sharekhan, too, retained their 'Buy' rating on the stock with a target of Rs 1,020.

"Max Life is incrementally investing in growing other channels/partnerships to reduce dependency on Axis Bank channel, which is a key positive. However, the company may need to increase payouts to deliver higher growth with new partners, which could have some impact on margins. Approval of Irdai on the remaining stake transfer to Axis Bank at FV, derived momentum in Axis Bank channel's performance, and a reduction in pledge on Promoter's stake could be positive triggers for the stock in the near term. Key catalyst over the medium term remains the reverse merger of Max Financials with Max Life Insurance along with the listing of Max Life," they said.

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First Published: Aug 24 2023 | 10:41 AM IST

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