Recently the Max India entered into a tripartite agreement for its life insurance joint venture, Max New York Life which paves the way for the exit of its existing JV partner, New York Life (which holds a 26% stake) and the entry of Mitsui Sumitomo Insurance Company ( Mitsui Sumitomo). The management
hosted a con call on same and the key highlights are as under.
The realization to Max India from the deal would be Rs802 crores and the tax liability on the same would be around 140 crores.
The Max India has not undergone any agreement with the new JV partner ( i-e Mitsui Sumitomo) for increase in stake post the change in FDI regulation. In the event of easing of FDI limit the company has option to negotiate the stake sale at current valuations (3.26x Embedded Value) or the fair value. However the company had agreement with New York Life to allow increase the stake at the discounted price in the event of increase in the FDI limit. This is significant positive for the company.
Company would not be required to pay the royalty amounting to Rs 77 crore to the new JV partner which it was paying to the Newyork life. The company (Max India) plans to pay the dividend this year (FY13) as the company has been earning profits on consolidated basis. It plans to derive synergy in various areas from association with Mitsui Sumitomo. The new JV partner would assist in expanding the Bank assurance channel, improve risk management practices, and expand cooperation in the healthcare businesses.
View: The deal is at a 31.5% premium compared to our estimated valuations of life insurance business. The earlier deal in healthcare business was also at significant premium to our estimates. This shows that company will continue to command premium over peers (insurance business) due to the superior performance, improvement in market share and better distribution channel and hence our SOTP based target price of Rs 234 is fairly conservative. We maintain our target price of Rs234 implying an upside of 20% from current levels.
....more info
hosted a con call on same and the key highlights are as under.
The realization to Max India from the deal would be Rs802 crores and the tax liability on the same would be around 140 crores.
The Max India has not undergone any agreement with the new JV partner ( i-e Mitsui Sumitomo) for increase in stake post the change in FDI regulation. In the event of easing of FDI limit the company has option to negotiate the stake sale at current valuations (3.26x Embedded Value) or the fair value. However the company had agreement with New York Life to allow increase the stake at the discounted price in the event of increase in the FDI limit. This is significant positive for the company.
Company would not be required to pay the royalty amounting to Rs 77 crore to the new JV partner which it was paying to the Newyork life. The company (Max India) plans to pay the dividend this year (FY13) as the company has been earning profits on consolidated basis. It plans to derive synergy in various areas from association with Mitsui Sumitomo. The new JV partner would assist in expanding the Bank assurance channel, improve risk management practices, and expand cooperation in the healthcare businesses.
View: The deal is at a 31.5% premium compared to our estimated valuations of life insurance business. The earlier deal in healthcare business was also at significant premium to our estimates. This shows that company will continue to command premium over peers (insurance business) due to the superior performance, improvement in market share and better distribution channel and hence our SOTP based target price of Rs 234 is fairly conservative. We maintain our target price of Rs234 implying an upside of 20% from current levels.
....more info