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The shareholding of Max India sponsor group, which is not tendering its shares for capital reduction, is likely to increase to 51 percent from the current 41 percent, company said.
Max India on September 15 said it will reward its shareholders by acquiring upto 20 percent outstanding shares at Rs 85 per share, under its capital reduction program.
Max India, which recently relisted on the Indian bourses on August 28 after a demerger process, has a treasury corpus of over Rs 400 crore created primarily from divestment proceeds of its erstwhile subsidiary, Max Bupa.
"Max India will explore a capital reduction program to reward its shareholders, as communicated during the divestment of Max Bupa by the erstwhile Max India. The company plans to offer its public (i.e., non-sponsor group) shareholders the option of taking Rs 85 per share for up to 20 percent of their shareholding in lieu of cancelling these shares," the company said in its BSE filing.
The company intends to utilise up to Rs 92 crore from the Rs 400 crore corpus for the capital reduction process, while the balance of over Rs 300 crore will be apportioned for growth and other operational expenses.
"We had expressed intent to reward shareholders at the time we divested health insurance business Max Bupa. This capital reduction process is a move towards that intent even though capital conservation has become important after the onset of COVID-19 induced economic slowdown. We will still have sufficient growth capital for growth and other expenses," Mohit Talwar, Vice Chairman, Max Group & Managing Director, Max India said.
Max India's share price closed at Rs 62 per share on September 14, 2020. The cash out through a capital reduction process translates to a 37 percent premium to this price.
The capital reduction proposal will also need to be approved by a special resolution of public shareholders. It will additionally need regulatory approvals including from stock market regulator and NCLT, Mumbai.
"The approvals process is expected to take about 6-8 months. Post capital reduction, Max India's outstanding shares will decrease by up to 20 percent, from 5.38 crore to 4.3 crore," Max India said.
The shareholding of Max India sponsor group, which is not tendering its shares for capital reduction, is likely to increase to 51 percent from the current 41 percent, it added.
As of August 27, promoter and promoter group including Max Ventures Investment Holdings, held 40.89 percent stake in Max India.
Max India sponsor group will seek a SEBI exemption from the open offer requirement accordingly, and the final quantum of capital reduction will be based on SEBI's decision on exemption, the company said.