Max Ventures To Sell 22.5% Stake To New York Life For Rs 121 Crore

Analjit Singh-promoted Max Ventures and Industries Ltd. on Monday decided to sell a 22.51 percent stake for Rs 121 crore to a subsidiary of New York Life, the largest U.S. mutual life insurance company. The board of Max Ventures approved the stake sale through a preferential allotment of fresh equity shares.

The proceeds from the stake sale will be used to fund Max Ventures' investments in manufacturing, real estate and education.

The proportion of investments in each of these businesses will be decided at a later stage, a Max Ventures and Industries spokesperson told BloombergQuint.

New York Life International Holdings Ltd. will acquire 1.5 crore shares, each with a face value of Rs 10, at Rs 78 per equity share, Max Ventures said in a media statement. The aggregate value of the deal is estimated at Rs 121 crore on a diluted basis, the statement added. The shares will be allotted at a premium of 16 percent to Monday's closing price.

The stake sale will entitle New York Life to nominate one director to the board of Max Ventures.

Max Ventures also proposed an additional allotment of warrants at Rs 78 apiece, aggregating to Rs 26.9 crore, to Siva Enterprises, a promoter group company.

The warrants can be converted into equity shares within 18 months from the date of allotment. Assuming full conversion, warrants will constitute 4.76 percent of the post-issue share capital.

This will take the shareholding of the promoter group in Max Ventures to around 38.02 percent on a fully diluted basis. The Max Group currently holds a 40.40 percent stake in Max Ventures.

New York Life currently holds 1.93 percent stake in Max Ventures, which will get diluted further to 1.495 percent after the issuance of equity shares. Following the completion of the deal, New York Life's total shareholding in Max Ventures will go up to 24 percent, according to BloombergQuint's calculation.

While the entry of an external investor such as New York Life might raise speculation that the company intends to enter the financial services space, the Max Ventures spokesperson clarified that there are no such plans for the foreseeable future. Instead, the company is expanding capacity in its focus areas.

The deal with New York Life is subject to shareholder approval, for which an extraordinary general meeting has been convened on February 7, 2017.

This is not the first time New York Life has joined hands with the Max Group. In 2001, the two had partnered to form Max New York Life in India, before New York Life sold 26 percent of its stake to Mutsui Sumitomo in 2012, which led to the renaming of the company as Max Life.