GOLDMAN Sachs is acquiring 9.4% stake in the Analjit Singh-promoted Max India for Rs 540 crore ($115 million) by subscribing to compulsory convertible debentures issued by the company.
The debentures will be converted to shares after 15 months.
Simultaneously, Max India is also issuing 2 million warrants to Analjit Singh for Rs 175 crore. Mr Singh is paying 50% of the total consideration (Rs 87 crore) upfront as against the stipulated requirement of 25%. These warrants will be converted into equity shares in any time during the next 18 months.
These decisions were taken at Max India board meeting on Saturday. ET had reported in its edition dated December 26 that Max India is looking to raise Rs 450-550 crore through a preferential allotment to a financial investor.
"The convertible debentures shall have a lockin period of 18 months along with a coupon rate of 12%. The instruments will be converted into equity shares at Rs 216.75 each," said Max India director Mohit Talwar.
Under the proposed agreement, Max India will give a board seat to Goldman Sachs along with information rights.
At CMP, Max India's market capitalisation stands at Rs 5,200 crore.
The proceeds of the preferential issue of convertible instruments will be used to fund the existing businesses of the company — insurance and healthcare. Max India operates its main businesses of life insurance and healthcare through two subsidiaries — Max New York Life Insurance and Max Healthcare. Besides, it also produces specialty plastic products such as niche and high barrier bi-axially oriented polypropylene (BOPP) films, thermal lamination films and leather finishing foils. The company also has a tie-up with Bupa for health insurance.
Max India has been looking at raising funds through the equity route for quite some time. It had originally planned to mop up Rs 1,000 crore through rights issue. Subsequently, it changed its plan and decided to raise only Rs 400 crore through the qualified institutional placement (QIP) route. This has also changed now.
The life insurance business constitutes around 84% of Max's revenues with the healthcare business accounting for another 8%. Max India reported consolidated revenues of Rs 4,166 crore in the first half of the current fiscal as compared to Rs 2,245 crore to the corresponding period last fiscal.
Meanwhile, the company's consolidated losses have come down Rs 87 crore in the same period this year from Rs 268 crore in the 2008-09 fiscal.
