Shares of Max India jumped nearly 9 per cent after the company raised its stake in the life insurance joint venture to 74 per cent from 50 per cent. Its partner, New York Life Insurance Co, holds 26 percent.
At 11:20 am, Max India shares were up 8.32 per cent at Rs 168 easing from a high of 172 in trade so far.
According to reports, the value of Max New York Life is pegged at over Rs 10,000 crore based on 2009-10 premium estimates. Max New York Life accounts for about 80 per cent of Max India's consolidated revenues.
As per the options agreement signed between the partners in 2003, for every equity investment made in the 26:74 joint venture, New York Life used to contribute 26 per cent, Max used to pump in 50 per cent, and the Indian company's remaining 24 per cent used to be funded through an advance paid to it by New York Life.
It had also been agreed that when the 26 per cent FDI sectoral cap in the insurance sector was relaxed, New York Life would have the option of increasing its shareholding in the joint venture to up to 50 per cent at par value. These provisions had been approved by the Insurance Regulatory and Development Authority, and were disclosed in Max India's successive annual reports.
However, under the fresh joint venture agreement, Max has repaid the Rs 174-crore deposit paid by New York Life and increased its economic interest to 74 per cent. The US partner will now have to buy the additional 24 per cent shareholding at 90 per cent of fair market value. New York Life will get a 10 per cent discount for being a promoter-shareholder when the transaction happens.
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