Private equity fund KKR picks up 10% in Max Financial Services

Private investor fund KKR & Co LP is reported to have bought 9.95 per cent stake in Max Financial Services for around $140 million, as the private equity investor looks to profit from the country's booming market for insurance firms.

KKR acquired the stake from a clutch of investors led by Analjit Singh, chairman Emeritus of Max Group. The investment was made from KKR's Asian FUND II, the fund said without disclosing the value of the deal.

The assessment of the deal value is based on Max Financial Services'  current market capitalisation of $1.35 billion.

Max Financial Services, the newly de-merged entity of the Max Group, holds around 72 per cent in Max Life, the fourth-largest life insurer in the private sector in India.

Max Group split several of its businesses last month into three separately listed entities - Max Financial Services, Max India - which have businesses in healthcare and health insurance, and Max Ventures and Industries Ltd, which makes specialty film for the packaging industry (See: Analjit Singh steps down as Max India split into three).

Max Life is a joint venture with Japan-based Mitsui Sumitomo Insurance.

With the further opening up of the insurance business, there has been a surge of foreign investment in the sector. The government now allows foreign direct investment of up to 49 per cent in insurance business.

A number of foreign investors, including French insurance giant AXA, UK-based Standard Life, Singapore's Temasek Holdings, Canada's Sun Life Financial Inc and Japan's Nippon Life, have increased their exposure in their Indian joint ventures (JVs), recently.

KKR made its investment in Max from its Asian Fund II through the portfolio route. The PE firm has been scaling up its investments in India.

In December, it picked up a majority stake in home-grown financial services firm Avendus Capital. Last year, it had invested $150 million in JBF Industries.

KKR said it sees ''robust growth'' happening in India's life insurance market given the low penetration, rise in savings in the country, and the aging of the 1.3 billion population.

After several months of single-digit growth or decline, Max Life reported 21 per cent growth in individual annual premiums in January, both in volumes and premium size, according to a recent report by Kotak Institutional Equities.

The average policy size in individual business was up 9 per cent year-on-year in January.

At the same time, several Indian insurance companies have been offloading their equity stakes in insurance firms. ICICI Bank had, in November, announced it would sell a 6 per cent stake in ICICI Prudential Life Insurance to Premji Invest and its affiliates, and Compassvale Investments Pte, a unit of the Singapore-based Temasek, for Rs1,950 crore.

Housing Development Finance Corporation also said it would sell 0.95 per cent in HDFC Life to the Azim Premji Trust for Rs198.9 crore.