Dr. Haresh Shah FCA; LLB; PhD (M&A)

DemDr. Haresh Shaherges into 3 Business Verticals- Life Insurance, Health & Allied Business and Manufacturing Industries 

The Board of Max India Ltd, on 27th January, 2015, approved a Corporate Restructuring plan to vertically split the company through a demerger, into three separate listed companies. The leadership would remain unchanged upon the demerger. The Board had also approved divestment of its clinical research business.

After the split, Max India will be renamed ‘Max Financial Services Limited’(MFSL) and will solely focus on the group’s flagship life insurance activity, through 72.1 per cent stake in Max Life, making it the first Indian listed company solely focused on life insurance. The Insurance Amendment Ordinance, recently promulgated by President of India, and widely expected to be approved as an Act, has created renewed investor interest in the Life Insurance Sector.

The second vertical would be Max India Limited (MIL / Resulting Company 1) which would continue to manage investment in the high-potential health and allied business comprised of Max Healthcare, Max Bupa, Antara Senior Living and supported by a corporate management service team. The Demerger will provide these businesses, which are currently in their growth and development phases, sharpened focus to fulfil their tremendous potential. The Corporate Management Services team will manage a shared Services Centre, which will provide functional support to all 3 verticals.

The third vertical will be named Max Ventures and Industries Limited (MVIL / Resulting Company 2) and it will house the investment in the group’s manufacturing subsidiary Max Speciality Films – one of the leaders in the speciality packaging films business (it recorded revenues of Rs 746 crores with a profit of Rs 14 crores in FY14). Max Ventures would look into exploring new businesses which would primarily be focused on providing affordable solutions but Mr .Singh did not divulge further details on that.

Max India has also initiated action for divestment of its entire 100% Stake in the Clinical Research Business. Max Neeman entities in India and United States are proposed to be divested to a Canadian Contract Research Organization (CRO), JSS Medical Research Inc. for consideration of US$ 1.5 million, subject to   successful completion of due diligence and signing of definitive agreement, expected by mid – February.


Max India Limited is a publicly listed company incorporated under the provision of Companies Act, 1956 on 24th February, 1988 having its registered office at Nawanshahr, Punjab. Issued, paid up and subscribed capital of the company as on date is 53,29,84,046/- divided into 26,64,92,023 Equity Shares of Rs.2/- each.It is listed on both national exchanges in India, The Bombay Stock Exchange and The National Stock Exchange. The largest shareholding is of the owner sponsors, led by Mr. Analjit Singh at over 40%. Other significant shareholders include some of world’s most prestigious private equity investors such as Goldman Sachs and International Finance Corporation, Washington (IFC)

Over the years, Max India has had a history of forging and nurturing strong and successful joint venture with leading global companies such as Hutchinson Telecommunications, Motorola, Schering AG, Avent Inc., Gist Brocades(GB), The Upjohn Company, Comsat International Ventures, Atotech BV. Today, the Company shares excellent relationships with its Joint Venture partners in the Life Insurance, Health Insurance and Heathcare space, Not only have these partnerships stood the test of time, they have consistently grown, developed and matured into strong relationships.

Max India is a multi-business corporate, driven by the spirit of enterprise and focused on people and service oriented businesses. The Company’s vision is to be one of India’s most admired corporates for Service Excellence. Max India Group has commanding presence in the Life Insurance, Health Care and Health Insurance Sectors.

Max India is in the ‘Business of Life’. It ‘Protects Life’ through its Life Insurance subsidiary Max Life Insurance Company, a Joint Venture between Max India and Mitsui Sumitomo, ‘Cares for Life’ through its Healthcare company, Max Healthcare, a Joint Venture with Life Healthcare, South Africa, ‘Enhances Life’ through its Health Insurance company, Max Bupa Health Insurance, a joint venture between Max India and Bupa Finance Plc., UK, ‘Rejuvenates Life’ through its Senior Living business Antara, a fully owned subsidiary of Max India and ‘Improves Life’ through its Clinical Research business, Max Neeman, a fully owned subsidiary of Max India. From its past, Max India continues its interest in manufacture of Speciality Products for the packaging industry.

In the Financial year 2014, the Group recorded a consolidated turnover of Rs.117 billion. It has a total customer base of around 8 million, over 300 offices spread across India and people strength of around 18,000 as on 31st March, 2014. Max India Limited is widely held Company.

Summary of Consolidated Financials of Max India (Unaudited)               (Rs. In Crores)

Particulars Quarter ended Sep 2014 Quarter ended Sep 2013 Change
Consolidated Revenue 2,483 2,158 15%
PBT 117 93 26%

Segment wise Performance:

Max Life Insurance, a 71% subsidiary of Max India, in Second Quarter for financial Year 2014-2015 (Q2FY15) continued to outperform the industry by posting an impressive individual new business premium (APE) growth of 5%, to Rs 436 Cr vs Q2 FY14. The Gross Premium (GWP) of the Company grew 15% to Rs. 1937 crore and Assets under Management (AUM) were up 29% to Rs. 28,038 crore.

Max Healthcare has in Q2FY15 reported a growth of 24% in net revenue to Rs 435 Cr, and 44% growth in Earning before Interest, Dividend & Tax (EBIDTA), to Rs. 45 Cr. It’s cash profit also grew by 180% to Rs 22 Cr. Life Healthcare completed its stake equalization with Max India, in Max Healthcare in the Q2 FY15, at an Enterprise Value of Rs 3,650 Cr.

Max Bupa Health Insurance in Q2FY15, a 74% subsidiary of Max India posted, a growth of 21% in Gross Written Premium to Rs 86 crore. Its average premium realization increased to 23% to Rs 6,452.

Antara Senior Living a 100% subsidiary of Max India in Q2FY15, serving the high potential Senior Living industry, continues to generate considerable media and public interest and witnessed encouraging sales momentum for its maiden senior living community being built at Dehradun.

Max Speciality Films, a subsidiary of Max India since 1 April 2014, saw a 25% increase in EBIDTA to Rs 20 Cr in Q2FY15


Currently three unrelated business are operating under one listed entity which was making difficult to explain its business model to different stakeholders if an entity is unable to describe its business in one sentence then the business itself stands to be questioned. The board of Max India, the flagship company of New Delhi-based serial entrepreneur Analjit Singh, on Tuesday 27th January, 2015 approved a three way demerger of its insurance (MFSL), healthcare (MIL) and specialty films (MVIL) with holding companies being created for each of them.

These may then be listed at a later date in a bid to unlock value in the separate businesses.

“Since the intrinsic value of the (individual division) is significantly higher, they will be listed separately on the Indian bourses that will have the ability to attract long-term investors, having special interest in these businesses.

“Besides unlocking value for the shareholders, one of the key reasons for demerging these businesses is that each of these had gone through hiccups in initial phases and has now turned around,” a person familiar with the development said.
“None of them needs any fresh capital from the promoter Max India and the only venture that is still burning cash is Max Bupa Health Insurance, a joint venture with British health insurance major Bupa, which decided to increase its ownership to 49% last week from the present 26%.” This follows an ordinance lifting the cap on overseas investment in insurance to that level.

Under the plan, Max India will park its stake in Max Life Insurance and Max Bupa Health Insurance in a holding company that will be listed on the bourses. The shareholding pattern in this holding entity will be similar to that of Max India, in which Analjit Singh and his family own 40.5%, with the remaining 59.5% being held by the public.

Max India currently has cash reserves of Rs. 605 crore as of December 31, 2014 and it is proposed that the cash be split between the three companies such that Max Financial Services will hold Rs 150 crore, Max Ventures Rs 10 crore and the rest, likely to be over Rs 400 crore, held by the newly formed Max India. There is a plan to make a voluntary open offer for buying up to an additional 34.5 per cent stake in Max Ventures and Industries, which will be listed after the demerger.

Appointed Date for Demerger is April 1, 2015 and the demerger is expected to be completed within the next six to Nine months.

Proposed Demerger is subject to approval by Max India Shareholders, Its creditors and relevant regulatory authorities.


The top leadership of Max India – Analjit Singh (Chairman), Rahul Khosla (Managing Director) and Mohit Talwar (Deputy Managing Director) will continue in their roles and upon demerger, will continue to hold appropriate roles in demerged entities of Max Group. The top leadership of Max group’s operating companies will continue in their respective roles- Rajesh Sud, MD and CEO of Max Life and chairman, Max Bhupa, Rajit Mehta, DMD of Max Healthcare, Tara Singh Vachani, CEO of Anatara, Jaideep Wadhwa, CEO of MSF and Mohini Daljeet Singh, Chief Executive of Max India Foundation.

Swap Ratio:

Once the demerger scheme is effective, after due regulatory approval, Max India’s shareholders whose name will appear in the Register of members on a ‘Record Date’ will retain one Equity Shares of Rs.2/- in MFSL (Existing Max India, as renamed) in addition, the Shareholders will get share in the new companies as detailed below:

  • One Equity Share of Rs.2/- each of MIL (Resulting Company 1) for every One Equity Shares of Rs.2/- each held in MFSL;and
  • One Equity Share of Rs.10/- each of MVIL (Resulting Company 2) for every Five Equity shares of Rs.2/- each held in MFSL.


Following the announcement, Max India shares soared to hit a 52-week high of Rs. 505 per share on the BSE on Tuesday, 27th January, 2015.

In one day, the company added over Rs 1,000 crore in market capitalisation to take it up to Rs 13,100 crore. The shares closed at Rs. 492.75 apiece on the BSE, up 8.40 per cent.

The plan to split the business was undertaken about a year back but this is the right time to act on it given the pro-business sentiment created by the government.

Max India had a top line of almost Rs 996 crore at the end of FY14, with a profit of Rs 185.16 crore during the year. Analjit Singh and his family own 40.5 per cent, with the remaining 59.5 per cent held by Goldman Sachs, Temasek, IFC (Washington), Fidelity and other public shareholders.


  • Life insurance business will grow at the same rate as in the past five years.
  • Growth curve for health care business will be much steeper and higher. Max Group is well capitalised and have stronger execution and management teams.
  • With the creation of Max Ventures and Industries, Max India Group will revisit new opportunities in this environment.
  • Analjit Singh (Chairman) has plan to re-engage and create new things for the Max group, and for the family. He also says that “The theme will be affordable solutions to tap the mass markets – the middle class, we have to analyse the gaps in the market at that level. I want to address at least 33 per cent of the population, and not only the top two per cent.”
  • The promoter of the Company, Mr. Analjit Singh, informed the Board of his intention to make a voluntary open offer for buying up to an additional 34.5% stake in Resulting Company 2, i.e. MVIL which would take his aggregate shareholding (together with person acting in concert) in MVIL to a maximum of 75% .


The Demerger is aimed at giving structural clarity for long term investors. This demerger will provide Investors with choice to continue to be associated with all these businesses, or only specifically invest in the set of businesses that suit their respective investment philosophy and to give investors specific and undiluted access to its diverse lines of Businesses, provide sharper focus to each underlying business, and unlock shareholders value.

It will simplify the ownership structure and have a clear line of sight – for investors, the company and the family.

Investors who only want to focus of life Insurance and / or health and allied activities and don’t have manufacturing focus will have an option through the open offer to exit this investment if they so wish.


Author is the Chairman at HU Consultancy Pvt. Ltd., a Consultancy Firm dealing in Corporate Restructuring, JV’s and Financial Re-Engineering. For queries, author can be reached at email id: [email protected]

This article is originally published in M & A Critique February 2015 Issue. To subscribe to such articles and more please visit www.mergersindia.com to keep yourself updated with M & A Activity in India and around the world.

© All rights reserved. Reproduction of Article in any format is not permitted without consent from the author and M & A Critique publication.

Keywords- demerger; restructuring; divestment; divesture

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