Now, It Is Max India’s Turn! Stock is a multibagger candidate - BSE Code - 539981

14/05/2017 19:01:00
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Q: What is going on in Max India Ltd (BSE Code: 539981)?  While other group companies performing well, this stock is hovering around 150 for a long time. Is it wise to still hold this stock or shall we shift to other stock? please guide us.

 A:Many important things are unfolding in Max India Ltd.  first let us know in detail about the current development in which the IFC, a world bank outfit, puts its stake in Max Healthcare up for sale. 

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In Max Healthcare, while Max India Ltd and Life Healthcare Group of South Africa, the foreign promoter, are holding 45.95% each, and another 7.5% stake in the equity is with International Financial Corporation (IFC). Now this World Bank outfit puts its 7.5% stake up for sale. The JV partners have come forward to acquire the IFC stake in equal parts. Post this deal, the stake of Max India in Max Healthcare will increase to 49.70% from the current 45.95%. For this acquisition, they considered the value of Max Healthcare share of Rs 10 (FV) at Rs 105. As per the valuation, the total stake of Max India Ltd in Max Healthcare is worth Rs 2,800 crore.

However, to buy the 50% of IFC stake in Max Healthcare, that will be 3.75%, Max India Ltd needed to mobilise the required funds. Promoter Analjit Singh has funded the acquisition by way of subscribing to a preferential issue of equity shares by Max India Ltd at a price of Rs 154.76. Thus, he paid a total of Rs 300 crore for 1.93 crores of shares. Post Issue, the stake of Analjit Singh in Max India Ltd is up 4% to reach 45.12%.

Max India Ltd has also been holding stakes in two other companies. It is controlling 51% in Max Bupa Health Insurance Company Ltd and 100% stake in Antara Senior Living Ltd.

The Max Healthcare Institute Limited, the company that runs the hospitals earned an operating profit of Rs 203 crore on a turnover of Rs 1,939 crore in the first nine months of 2016-17. This single division itself will report an income of Rs 2,500 crore and an operating profit of Rs 250 crore for the full financial year 2016-17.

Max Bupa Health Insurance company Ltd could collect Rs 544 crore as premium income, an increase of 38%, for 2016-17, as against Rs 393 crore for the previous year. Though the company incurred an operating loss of Rs 81.46 crore in 2015-16, it could earn an operating profit of Rs 85.07 crore in the next year 2016-17. The net loss of Rs 68.49 crore suffered in 2015-16 had almost melted away in the following year to a minuscule loss of Rs 3.67 crore. The company has been recording an annual growth of 25%.

Max Group promoters, for the last one year, fully concentrated on Max Financial Services Ltd and Max Ventures and Industries Ltd. Now they turned to Max India Ltd and are taking measures to improve its valuations. The stock of Max India Ltd is going to be a multibagger in a year.                

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