Shares of Max India (MIL) rose over 11% after the company’s board of directors approved a plan to restructure the business into three verticals through demerger route, taking into account the recent policy reforms in the insurance sector. Shares of MIL closed at Rs 492.75 on BSE, up Rs 38.20 or 8.4% over the previous close.
MIL will be split into three firms with the current company proposed to be named Max Financial Services (MFS) and will focus on insurance as the sole business. The second entity will be named Max India and will house the investments in the health verticals, including hospital chain operator Max Healthcare, health insurance JV Max Bupa and Antara Senior Living. The third entity will be renamed Max Ventures and Industries (MVIL) from Max Specialty Films (MSF) and will house the investment activity in MSF.
As per the proposal, existing shareholders will receive MFS shares in 1:1 ratio and MVIL shares in 5:1 ratio. The company announced divesting stake in clinical research business Max Neeman Medical International (MNMI) in India and the US to Canadian contract research organisation (CRO), JSS Medical Research India for $1.5 million (Rs 9.5 crore). The deal subject to due diligence, is expected to close by mid-February. Upon the completion of the demerger, MFS will hold 72.1% stake in Max Life.
After the completion of demerger, MIL promoter Analjit Singh has proposed to acquire 34.5% stake in MVIL from public shareholders through a voluntary open offer. A back-of-the-envelope calculations suggests the company will have to acquire 1.8 crore shares (based on the demerger ratio) for Rs 58 crore. MVIL’s approximate valuation of 100% stake at listing is pegged at Rs 168 crore, said the company in a release.
