Shares of Axis Bank and Max Financial Services on Tuesday gained up to 6.6 per cent after the bank decided to raise its stake in Max Life Insurance to 30 per cent.
Axis Bank shares zoomed 6.61 per cent to close at Rs 455.55 on the BSE. During the day, it jumped 7.24 per cent to Rs 458.25.
Max Financial Services also gained 5.14 per cent to close at Rs 475.80. It rose by 8.79 per cent to Rs 492.35 during the session.
Axis Bank has decided to raise its stake in Max Group promoted Max Life Insurance to 30 per cent, a development which values the insurer at over Rs 5,000 crore.
With the deal going through, sources said, the bank is expected to pay Rs 1,600 crore to Max Financial Services (MFS), the holding company of Max Life.
Axis Bank holds about 1 per cent stake in Max Life and is the biggest banking channel partner for distribution of its products. Products sold through the bank reportedly contribute for 54 per cent of Max Life's revenues.
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The boards of Axis Bank, MFS and Max Life approved the transaction late on April 27, a joint statement said on Tuesday.
"This is an outcome of the inter-se discussions after the three companies had signed a confidentiality and exclusivity arrangement on February 20, 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life," it said.
Interestingly, the deal comes at a time when the economy is hit by COVID-19 crisis impacting all sectors of the economy, including the financial sector.