Nod to Max Financial for Rs 850 cr non-compete fee despite Amfi opposition

The deal is part of the amalgamation of Max Life Insurance with Max Financial Services as also the demerger of insurance business for transfer to HDFC Standard Life Insurance Co.

According to a stock exchange filing, 64.7 per cent of the minority shareholders gave their assent to the deal, while 35.3 per cent voted against it. The decision follows postal ballot result while the company passed an ordinary resolution to approve the process. “It seems several mutual funds supported the proposal to pay non-compete fee despite the an Amfi advisory against it,” said an institutional source.

Proxy advisory firm IiAS had recommended voting against the resolution as “the rationale for paying non-compete fee itself is unclear”. “After the merger, the promoters of Max Financial will continue to hold a 6.5 per cent stake. The large stake by itself should act as a deterrent for Max Financial promoters from starting a competing business. Additionally, the non-compete fees are being paid by the merged entity, which implies that Max Financial’s minority shareholders (who will receive HDFC Standard Life’s shares) will bear part of the expenses,” it said.

As non-compete fee, promoters receive over Rs 100 per share in addition to those of the merged entity which is a 21 per cent premium over the returns for non-promoter shareholders.