Analjit Singh-promoted Max Ventures and Industries Ltd on Monday said it has decided to sell a 22.51 per cent stake for Rs121 crore to a subsidiary of New York Life, the largest US mutual life insurance company.
The board of Max Ventures has approved the stake sale through a preferential allotment of fresh equity shares. The proceeds will be used to fund Max Ventures' investments in manufacturing, real estate and education.
''The funds coming in will be used to invest in MaxVIL's focus areas, including manufacturing, real estate development and education, and will provide intellectual and financial capital to promising and proven early-stage organisations. We are privileged to have New York Life as an investor,'' said Sahil Vachani, managing director and chief executive of Max Ventures and Industries.
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 15 million shares, each with a face value of Rs10, at Rs78 per equity share, Max Ventures said in a media statement. The aggregate value of the deal is estimated at Rs121 crore on a diluted basis, the statement added. The shares will be allotted at a premium of 16 per cent 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 Rs78 apiece, aggregating to Rs26.9 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 per cent of the post-issue share capital.
''The warrants, which are convertible into equity at a later stage, will allow the promoter to minimise the stake dilution in MaxVIL,'' said a Max Ventures spokesperson.
This will take the shareholding of the promoter group in Max Ventures to around 38.02 per cent on a fully diluted basis. The Max Group currently holds a 40.40 per cent stake in Max Ventures.
New York Life currently holds 1.93 per cent stake in Max Ventures, which will get diluted further to 1.495 per cent 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 per cent, 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.
''Max Ventures does not intend to enter the insurance space as an operator in the foreseeable future. It is currently expanding capacity in its speciality packaging films business, has begun work on a couple of real estate projects through its subsidiary Max Estates and has bought minority stake in Azure Hospitality and Nykaa.com through its investment subsidiary Max I. It is also set to enter the education space,'' the spokesperson said.
The deal with New York Life is subject to shareholder approval, for which an extraordinary general meeting has been convened on 7 February.
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 per cent of its stake to Mutsui Sumitomo in 2012, which led to the renaming of the company as Max Life.