Max India is being demerged into three companies, all of which will get listed once the demerger process is complete. With this, Max Life, the company’s life insurance business in which Max India holds 72.1 per cent stake, will be the first life insurance company in the country to get listed as Max Financial Services (MFS).
The second company, Max India, will have Max Healthcare, Max Bupa Health Insurance and Antara Senior Living. The third entity will be Max Ventures which will be the investment arm of Max Speciality Films.
The individual adjusted premium grew 12 per cent in the first half of 2014-15. The company has also maintained steady persistency, which measures the number of policies retained with an insurer across different time periods. Max Bupa (health insurance), in which Max India holds 74 per cent stake, is also a fast growing business. Given the increasing medical costs and growing awareness of medical insurance products, this market is expected to grow at a healthy pace in the coming years. The net premium for Max Bupa grew by 46 per cent in the first half of this fiscal.
Max Healthcare, which operates a network of hospitals in North India, is a joint venture between Max India (46 per cent stake), South African player Life Healthcare (46 per cent) and IFC. This business turned cash positive in 2013-14. During the recent September quarter, cash profit nearly tripled from ₹8 crore in the year-ago period to ₹22 crore.
Valuation The value of Max India on a sum-of-the-parts basis works out to about ₹500, close to the stock’s current price of ₹493. This does not leave much scope for upside. Of this, the life insurance at about ₹400 a share, based on the appraisal value method accounts for the lion’s share of the overall valuation. The value per share of the healthcare business comes to about ₹60, while that of the health insurance business is about ₹27. The rest is accounted for by Max India’s speciality films business, which is valued on an EV/Ebitda basis.