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Max India Stock Analysis

Date: 1 July 2015

Price: Rs. 481

The stock analysis of Max India including the financial analysis report linked below, is for information purpose only.  This analysis should not be taken as a buy/sell recommendation. The circumstances of the company and the economic environment may have changed since the date of this stock analysis. Click the link for an updated list of the mid cap companies in India.

Max India Limited (“Max India” or “Company“) is engaged in various diversified businesses including healthcare, life insurance, health insurance, clinical research, etc. The Company operates through different subsidiaries for its businesses:

►  Life Insurance: Max Life Insurance Company Limited (formerly Max New York Life Insurance, a joint venture (JV) between Max India and New York Life)

►  Healthcare: Max Healthcare, a subsidiary of Max India, in partnership with Life Healthcare of South Africa.

►  Health Insurance: Max Bupa Health Insurance, a JV between Max India and Bupa Finance Plc, UK.

►  Senior Living: Antara, 100 % owned retirement community in Dehradun

►  Max Speciality FilmsPolypropylene films (used in packaging, label & print finishing applications)

Factors below have been considered to present an equity stock analysis of Max India Limited. For a financial report of the company, visit here – Max India Limited.


Consistent Track Record of Strong Growth across Businesses

Max India has shown consistent growth over the last five years (i.e. 2010-11 to 2014-15). Its net revenue from operations over this period grew at an impressive CAGR of 17.31 %. For FY 2015, income from operations increased by 27.43 % to Rs. 14,815.35 Cr. from Rs. 11,626.33 Cr. and Profit after Tax increased by 74.20 % to Rs. 364.91 Cr. from Rs. 209.48 Cr. Max India has reserves in excess of Rs. 3,248.72 Cr.

Life Insurance Business: Increasing its Position in a Growing Industry

The Indian life insurance industry is amongst the largest retail financial services business in the world with over Rs. 36 Cr. in-force policies which are expected to increase at a compounded annual growth rate (CAGR) of 12-15 % over the next five years. In India, only 20% of the total population is covered under various life insurance schemes which further shows the huge potential in the sector. In India, the life insurance industry is led by one public insurer – LIC commanding 51 % share; private players (like Max India) have gradually increased its share in the life insurance industry from 15 % in FY 2004 to 49 % in FY 2015.

Max Life Insurance ranked fourth among private life insurers with a market share of 9.7% and 3.7 million in-force policies (as of March 31, 2015).  The life insurance business of the Company contributed 84 % of the total revenue in FY 2015. We believe that the increasing working population, per capita income, rising life expectancy and under penetrated market, provides a huge untapped opportunity for the Company to further increase its market share and thereby increase its revenue contribution in the coming years.

Increase in FDI Cap in the Insurance Sector

Max India will be one of the key beneficiaries of Government of India’s (GOI) recent initiative to increase Foreign Direct Investment (FDI) from 26% to 49% in the insurance sector. Higher foreign investment will help the company in expanding into newer markets, particularly in rural areas which will benefir not only the insurance business but also the healthcare services provided by Max Healthcare.

* Current FDI in Max Life Insurance Company Limited (formerly Max New York Life Insurance, a joint venture (JV) between Max India and New York Life) stands at 26%.

Booming Healthcare Business – Max Healthcare

The Indian healthcare industry is driven by supply-demand disparity, growing per capita income, increasing awareness of health conditions, growth in medical value travel, greater penetration of health insurance and better awareness of quality healthcare.

Max healthcare has also leveraged its expertise by taking the advantages of under penetrated healthcare segment, lower bed density and lowest per capita spending. Max Healthcare has shown consistent growth over the last five years (i.e. 2010-11 to 2014-15). Its revenue and profit over this period grew at a CAGR of 10.03 % and 33.98 % respectively. Max Healthcare is currently focused on North India with 2000 beds across a network of 12 hospitals and is planning to increase this to 4,000 beds across 16 hospitals. We believe increasing occupancy rate and improved average revenues per bed will continue to drive the revenue and profitability of the Company.


Max India will split into three separate listed companies. Through a demerger, the group will have three separate business verticals.

First Vertical – Max India will be renamed as Max Financial Services and will engage in life insurance.

Second Vertical – Max India Ltd for health care, health insurance and allied business (Antara Senior Living)

Third Vertical – Max Ventures and Industries Ltd for manufacturing activities.

Share Ratio

Once the demerger scheme is effective, Max India’s shareholders will retain one equity share (of Rs 2) in Max Financial Services Ltd and will additionally get one equity share (of Rs 2) in Max India Ltd. They will also get one equity share of Rs 10 each of Max Ventures and Industries for every five equity shares of Rs 2 each held in Max Financial Services. To explain with an example, assuming the investor owns 5 equity shares of Max India Limited, the split will affect him in the following way:

The demerger is expected to be completed by September 2015.

Rationale Behind Demerger – This demerger will provide investors with a choice to continue to be associated with all these businesses, or only specifically invest in the set of businesses that suit their investment philosophy.


Intense Competition

Max Healthcare: Entry of new players in the industry and increasing dependence of hospitals on technology and skilled manpower make healthcare business as an extremely  capital intensive business.

Health Insurance: Although the Company’s health insurance business (Max Bupa) has grown by 49% last year, it is still a relatively smaller player in this segment. Some of the larger players, especially the public sectors players, have large insurance books and command over half the market share. Competition has increased further with the entry of new players. As such, considerable effort will be required to compete in this market.

Regulatory changes or delay in periods

New products in insurance business require approval from Insurance Regulatory and Development Authority (IRDA). Any delay with regard to product approvals both in life as well as in health insurance will remains a great threat to the growth of the business.