The Securities and Exchange Board of India (SEBI) has issued a show cause notice (SCN) to Axis Bank and its subsidiaries regarding their stake purchase in Max Life Insurance. The notice, sent on October 25, raises questions about the regulatory compliance of these transactions, prompting Axis Bank to review the SCN and prepare a response.
Axis Bank’s Regulatory Filing on the Notice
In a regulatory filing, Axis Bank disclosed receiving the SCN via email, along with its subsidiaries, Axis Securities Limited and Axis Capital Limited. Axis Bank indicated that the stake acquisitions in Max Life were conducted with the necessary regulatory approvals. The bank has committed to submitting a detailed response to SEBI’s notice, emphasizing that its actions followed proper procedures.
Involvement of Max Financial Services
In addition to Axis Bank, Max Financial Services, the parent company of Max Life Insurance, confirmed that a few directors and key executives, both past and present, have also received an SCN from SEBI. This includes individuals involved in overseeing the company’s financial and operational decisions.
Background of the Axis Bank-Max Life Deal
Axis Bank’s investment in Max Life has been under close scrutiny due to the complex nature of the acquisition. Originally, in 2021, Axis Bank entered a deal with Max Life to increase its stake in the insurance firm, acquiring close to 20% ownership. This move was approved by the Insurance Regulatory and Development Authority of India (IRDAI), which permitted Axis Bank, Axis Capital, and Axis Securities to collectively hold up to 20% of Max Life’s shares.
Revised Agreement and Stake Increase
In 2022, Axis Bank revised its agreement with Max Financial Services to purchase an additional 7% stake in Max Life Insurance. This agreement specified that the transaction would be based on fair market value using the discounted cash flow method, in line with guidance from IRDAI. This decision elevated Axis entities’ total holding in Max Life Insurance to nearly 20%, providing the bank with a substantial stake in the insurance firm’s operations.
