Jefferies has moved Max Financial Services to the top of its life insurance picks, retaining a Buy rating despite cutting its target price. The brokerage expects regulatory changes to have a manageable impact on growth and sees further opportunities through Axis Bank. According to reports from The Economic Times, the revised target price of ₹2,050 still implies 41% upside from Max Financial's previous close of ₹1,451, even after the reduction from the previous target of ₹2,250. The brokerage's optimism comes even as the stock has faced pressure following the IRDA distribution consultation paper, with investors concerned about the company's ability to balance growth with expense management. As per The Financial Express, the stock has fallen 7% since the IRDAI distribution consultation paper, with investors concerned that tighter Expense of Management (EOM) requirements could slow Annualised Premium Equivalent (APE) growth.
The brokerage believes investor concerns over the impact of new distribution rules on the company's growth are exaggerated. As reported by The Economic Times, the impact of the revised surrender rules was initially expected to hurt margins by 100-200 basis points, but the actual impact narrowed to around 50 basis points within two quarters. Similarly, the loss of input tax credit had a gross impact of around 350 basis points, but the company largely offset this through changes in product mix, cost efficiencies and higher rider attachment. Jefferies believes the latest distribution changes could follow a similar pattern, with the company having several levers to bring down its EOM ratio. According to The Financial Express, Max Financial's EOM ratio was 23% in FY26 and needs to fall to 15% by FY29 and 12.5% by FY32. The brokerage estimates that group funds expansion, changes to the commission structure and cost rationalisation could help reduce the ratio through a combination of group funds expansion (c.300bps benefit), new commission structure (c.400bps) and cost rationalization (c.100bps).
Jefferies believes Max Financial can bring down its EOM ratio from 23% in FY26 to 12.5% by FY32 without a major hit to growth. According to the brokerage's analysis reported by The Economic Times, group funds expansion, the new commission structure and cost rationalisation could together provide significant savings by FY29. The relationship with Axis Bank, where Max Financial currently holds a 65-70% counter share while Axis Bank owns a 20% stake, is viewed as an important opportunity for future premium growth as commission rates normalise under the new framework and Max Financial potentially gains more shelf space at Axis Bank. Banca growth has lagged the company's overall business in recent years, but Jefferies sees this changing as commission rates normalise. As per The Financial Express, the company's past performance after regulatory changes suggests Max Financial has consistently surprised positively.
Max Financial shares were trading at ₹1,441, down 0.69% on Monday morning, as reported by The Economic Times. The stock has declined 27.06% so far in 2026 and 23.50% over the past year. Despite these challenges, the company delivered 19% annualised premium growth over the past three years despite several major changes to the life insurance industry, including changes to tax benefits, surrender regulations and the loss of input tax credit. Jefferies expects the company to maintain strong growth over the medium term, helped by its expanding agency network, Axis Bank initiatives and opportunities in areas such as credit life, with margins expected to improve as the business gains scale and persistency improves.
