Max Financial shares rally 15%, hit 52-week high; should you buy stock as Axis Bank modifies deal?

The brokerage firm said that this change has been made in consultation with the regulators, we believe that the deal should not face much resistance when they seek approval, making this investment inevitable

Max Financial Services share price rallied nearly 15 per cent to hit a fresh 52-week high of Rs 631.25 apiece on NSE a day after Axis Bank announced that it would acquire 17 per cent stake in Max Life Insurance, instead of 29 per cent. Max Financial Services has surpassed its previous high of Rs 611.90 apiece touched on March 4, this year. This transaction will result in Axis Bank’s total ownership of 18 per cent in the insurer. Earlier this year, the board of Axis Bank had approved the purchase of 29 per cent stake in Max Life Insurance which could have taken the total stake of the private lender in the insurer to 30 per cent.

Around 2.15 PM, Max Financial Services shares were trading 12.79 per cent higher at Rs 620 apiece, as compared to a 0.15 per cent fall in the benchmark S&P BSE Sensex. “The parties have executed the definitive agreements. Axis Bank and Max Life will shortly approach the respective regulatory authorities, with revised applications for their consideration and approval. The transaction is subject to regulatory approvals,” Max Financial Services said in a BSE filing.

Research and brokerage firm Emkay Global Financial Services has given a ‘buy’ rating to the stock with a price target of Rs 660 apiece, an upside of 20.1 per cent from the previous close. “Since this change has been made in consultation with the regulators, we believe that the deal should not face much resistance when they seek approval, making this investment inevitable. With the deal nearly coming through, we remain optimistic about management’s plan of bringing in product diversification,” it said. 

The brokerage firm also added that with Axis Bank acquiring lower than expected ownership in Max Life, minority holders of Max Financial would remain at an advantage as a major stake of the pure life insurance business will fall in their kitty. This appears to be a positive development and should lift the overhang on the stock, leading to a potential re-rating. Meanwhile, Axis Bank has managed to raise Rs 10,000 crore through qualified institutional placement (QIP) issue on August 10. 

Meanwhile, Axis Bank has managed to raise Rs 10,000 crore through qualified institutional placement (QIP) issue on August 10.