Max India | Company Update | Max India to split 3 businesses and list them separately..Sharp run up in stock price seems to have already priced in all positives, downgrade to HOLD with revised target price of Rs 518. :: IndiaNivesh

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run up in stock price seems to have already priced in all positives, downgrade to HOLD with revised target price of Rs 518… Max India’s board has approved corporate restructuring of the company by splitting the company into 3 parts by demerging and later on listing them separately. Max India will be renamed as Max Financial Services Ltd (MFS) which will be the life insurance entity and will be the first life insurance company to get listed on stock exchanges. Second company will be Max India which will have Max Healthcare, Max Bupa Health insurance and Antara Senior living. Third part will be Max Ventures which will look after investments in manufacturing arm, Max speciality films Ltd. Management of all the individual companies will continue to remain same. Promoter of Max India is to make voluntary open offer for buying upto additional 34.5% stake in Max Ventures post demerger ie once it gets listed. Further Max India will divest its entire stake in Max Neeman which is into clinical research for consideration of USD 1.5 mn to Canadian Contract Research Organisation (CRO), JSS Medical Research. This will be subject to successful completion of due diligence and signing of agreement between the parties. In FY14, Max Neeman has done total revenue of Rs 215 mn and Net loss of Rs 8 mn. Post demerger and splitting of the businesses, Max India’s shareholders will continue to have one equity share of 2 each in Max Financial services Ltd (which will hold Max Life Insurance business) and will get additional one equity share of Rs 2 each of Max India Ltd (which will hold Healthcare and Health Insurance business). Further Max India’s shareholder will also get one equity share of face value Rs 10 of Max Ventures and Industries Ltd for every 5 shares of Rs 2 each of Max India. Further Max India at consolidated level has total cash of Rs 6.05 bn which will be splited in 3 entities of which Rs 1.5 bn will go to Max Financials services, Rs 100 mn will be with Max Ventures and remaining will be in Max India. Our Take and Valuation This move of splitting the businesses and listing them separately was largely inline with our view stated in our recent updates on Max India dated 14th January 2015 and 23rd January 2015. This will be beneficial to both investors and company. Investors will have a focused investment with pure play on individual business and Company will get benefited by way of value unlocking mainly because the holding company discount will vanish. Key positive was the management control and leadership which continues to remain same for all its businesses

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