Tag: Max India

Max India Demerger saga finishes

Last week the final (3rd) company from Max India demerger exercise got listed on bourses, we started tracking this story in Jan 2016. A lot has happened over last six months and it’s time to take stock and understand how this spin off / demeger has played out.

In Jan’ 2016 we conservatively estimated that then market cap was a 5% premium to our calculated value of 3 sub-divisions. Let me do a memory jog for you

Max India - 7

On date of spin off the insurance business was valued at about ~INR 10,500 crores even lower than our conservatively calculated value.

Was this expected ?

This is what Joel Greenblatt has to say on Spin offs in his book “You can be a stock market Genius”

spinoff-8

Investors who didn’t want Life insurance simply dumped the stock. However our conclusion in Jan 2016 was a bit different

life insurance business is not directly listed in India so may see some traction with investors.

And hey ! what happened in June 2016

max india part 2 -1
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Max India – Spin off Analysis

In Jan’ 2015, almost a year back diversified firm Max India spin off plan were announced management indicated it is splitting listed entity into three companies with the existing firm becoming India’s first listed company with insurance as the sole business.

The Max India Group is a multi-business corporate, the listed entity has following primary business

  1. Life Insurance – As a 74: 26Joint venture with Mitsui Sumitomo of Japan
  2. Max healthcare – Operating as equal JV with Life group of South Africa
  3. Health Insurance – As a 74: 26 Joint venture with BUPA of UK
  4. Antara – 100% owned retirement living real estate venture
  5. Max specialty Films – 100% owned

Last year the conglomerate began a demerger exercise which will result in listed company being spilt into three listed companies as per below

Max India -1

Source – Investor presentation, Nov 2015

In this brief post we try and examine if the sum of parts would be greater or lesser than the current M-cap, Let’s go to the drawing board.

Max Financial services – The largest piece of the spun off entity is a well-established life insurance provider in India. Life Insurance is a crowded place in India were on one hand we … Read the rest