HDFC Life Insurance, India’s largest private insurer, announced on Friday that its board of directors has authorized the acquisition of 100% of Exide Life Insurance Company’s share capital for a total payment of Rs 6,687 crore. In Friday’s early deals, HDFC Life’s stock was trading over 3% lower on the BSE, while Exide Industries’ stock was up 10%.
The life insurance company will acquire a 100 percent stake in Exide Life from Exide Industries. The agreement involves the issuance of 8,70,22,222 shares at a price of Rs. 685.5 per share and a cash distribution of Rs.726 crores, for a total of Rs. 6,687 crore. Following the completion of the acquisition, the process for merging Exide Life into HDFC Life will begin. Exide Life is a unit of battery maker Exide Industries,
The country’s largest insurance deal may inspire even more consolidation in the industry, which includes around 57 companies; including two dozen life insurers.
What HDFC said about the acquisition?
According to HDFC Life, Exide Life’s embedded value as of 30 June 2021 is Rs 2,711 crore; examined by Willis Towers Watson Actuarial Advisory LLP. HDFC Life’s scale, market-leading digital and product innovation capabilities, and prudent risk management strategy will aid in optimizing the transaction cost. As well as achieve higher margins for the acquired business, over time.
Moreover, according to HDFC Life, the proposed merger will accelerate the expansion of its agency business. While also strengthening other distribution channels such as Broker, Direct, and Co-operative Banks. Furthermore, a high-quality, mostly traditional and protection-focused firm will add roughly 10% to HDFC Life’s existing embedded value. Exide Life’s strong presence in South India, particularly in Tier 2 and 3 cities, will provide access to larger markets.
According to HDFC Life, customers will benefit from a better product suite, a bigger distribution network, and more service touchpoints. It expects synergies to boost shareholder value; with the potential to boost new business margins through operating leverage and product mix optimization.
The whole transaction, including the acquisition and eventual merger, is subject to receiving all necessary regulatory and other approvals.According to Deepak Parekh, Chairman of HDFC Life, “This merger is a landmark transaction, the first of its type in the Indian life insurance industry. It will potentially increase insurance penetration. Thus it will help us achieve our goal of providing financial protection to a larger number of people.” For more such updates, keep watching this space!