Shares of Max Financial Services Ltd. declined the most since Jul. 5, 2016, falling as much as 19.32 percent to Rs 488.25 apiece, due to exposure to crisis-hit Yes Bank Ltd.
The company has Rs 2,000 crore exposure to Yes Bank via Tier-II bonds, it said in a conference call, adding that the shareholder exposure is Rs 1,000 crore and balance rests with policyholders.
The company, however, said these bonds are held till maturity and hence no mark down is required in the profit and loss account. Mark-to-market loss will arise only when there is a default on interest payment or rating is downgraded to 'D', it said.
The company said it will approach the Reserve Bank of India if required and act in the best interest of the stakeholders involved. Never in the history of the banking system have Tier-II bonds been touched, it said.
Bancassurance channel with the lender contributes 10-11 percent to its annualised premium equivalent and 3-4 percent to its value of new business, it said. “Overall impact on the top line is 10-11 percent but the impact on embedded value is very minimal.”
On its potential deal with Axis Bank Ltd., the company clarified that whatever transaction happens will happen with Max Life Insurance Company Ltd. and not Max Financial—the listed holding entity of the life insurer.
Also Read: Yes Bank's Bonfire of Insanity Was Left to Burn
Max Financial, Axis Bank and Max Life had signed a confidentiality and exclusivity pact to explore the possibility of the private lender entering into a long-term strategic partnership with the life insurer.
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