The insurance regulator requests SEBI look into whether the book was used to assess the fair market value. CNBC-TV18 reported this.
After looking into the transfer of Max Life’s shares to Axis businesses in March 2021, the IRDAI penalized Max Life Rs 3 crore on October 13, 2022.
According to CNBC-TV18 on August 31, the Insurance Regulatory and Development Authority of India (IRDAI) has written to the Securities and Exchange Board of India (SEBI) requesting that it look into the Axis Bank-Max Life Insurance agreement. A division of Max Financial Services is Max Life Insurance.
To determine whether there were any irregularities in estimating the fair market value of Max Life Insurance shares, the insurance regulator has ordered SEBI to conduct an investigation.
Only IRDAI had previously been looking into share transfers made in March 2021 and had also levied a fine, but now the regulator has also enlisted SEBI, according to CNBC-TV18.
In an August 9 filing, Axis Bank stated that its board had approved increasing the bank’s share in the life insurance from 9.9 percent to 16.22 percent, bringing the total stake held by Axis businesses to 19.02 percent.
In order to purchase 14.25 crore shares at Rs 113.06 each, the bank will inject Rs 1,612 crore into Max Life, representing a premium of Rs 103.06 per share over the face value of Rs 10 per share, it was announced.
According to the filing, the transaction was made to improve the bank’s position in the life insurance industry.
IRDAI repression
Following an investigation on the transfer of shares to Axis businesses in March 2021, the IRDAI fined Max Life Rs 3 crore on October 13, 2022.
According to its findings, Axis Bank sold shares to Max Financial Service Limited (MFSL) and Mitsui Sumitomo International (MFI) for Rs. 166 apiece on March 15 and 16, 2021. Ten or eleven days later, Axis businesses (Axis Capital, Axis Securities, and Axis Bank) purchased the shares from MFSL and MFI for a price ranging between Rs 31.5 and Rs 32.12.
The identical equity share is valued differently depending on whether Axis Bank is the buyer or seller, as the IRDAI order noted.
“The transfer of shares was not done at fair market value determined on a uniform basis, which resulted in Axis Bank, a registered Corporate Agent of the Insurer, and its group companies receiving undue financial gain of significant amounts from such buy/sale of equity shares,” the order stated.
On October 13, 2022, the IRDAI penalized Axis Bank Rs 2 crore for failing to follow its instructions and for obtaining significant unauthorized gains through the sale of these shares.
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