HDFC Life to acquire Exide's Insurance Business for Rs6687cr

In the regulatory filing, the process for the merger of Exide Life into HDFC Life will be initiated on completion of the acquisition.

Sep 03, 2021 10:09 IST India Infoline News Service

The Board of Directors of HDFC Life Insurance Company Limited (HDFC Life), Exide Industries and Exide Life Insurance Company Limited (Exide Life), at their respective meetings held today, approved the transaction involving the sale of Exide Life Insurance to HDFC Life.

HDFC Life will acquire a 100% stake in Exide Life Insurance from Exide Industries via issuance of 8,70,22,222 shares at an issue price of Rs685 per share and a cash payout of Rs726cr aggregating to Rs6,687cr.

In the regulatory filing, the process for the merger of Exide Life into HDFC Life will be initiated on completion of the acquisition. The entire process, including the acquisition and subsequent merger, is subject to obtaining the relevant regulatory and other approvals.

The proposed transaction will give customers access to a wider bouquet of products and service touch points. Employees and agents will benefit from a larger, stronger organisation that realises the synergies arising out of complementary business models built on similar ethos. The proposed transaction will accelerate the growth of the Agency business of HDFC Life.

Exide Life complements HDFC Life’s geographical presence and has a strong foothold in South India, especially in Tier 2 and 3 towns, thus providing access to a wider market. Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10%.

The embedded value of Exide Life, as on 30th June 2021, is Rs2,711cr and has been reviewed 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 cost and over time, achieve higher margins for the acquired business.

The closure of the proposed transaction will inter alia be subject to approval by relevant regulators including the Insurance Regulatory and Development Authority of India (IRDAI), Competition Commission of India (CCI), National Company Law Tribunal (NCLT), stock exchanges and approval by the shareholders of HDFC Life and Exide Industries.

Commenting on the proposed transaction, Mr. Deepak S. Parekh, Chairman, HDFC Life said, “This is a landmark transaction, first of its kind, in the Indian life insurance space. It would enhance insurance penetration and further our purpose of providing financial protection to a wider customer base.”

Ms. Vibha Padalkar, MD & CEO, HDFC Life said, “We believe that this amalgamation can result in value creation for customers, employees, shareholders and distribution partners. It gives us an opportunity to realise synergies arising out of complementary business models, and further bolster our proprietary distribution network.”

Mr. Rajan B Raheja, Vice Chairman, Exide Industries Limited and Chairman, Exide Life Insurance Company Limited said, “The focus of Exide Industries has always been to enhance the value for its stakeholders. The proposed transaction is another step taken by Exide to meet above stated objective. It is likely to be a win-win situation for all stakeholders, since our subsidiary, Exide Life Insurance is going into the hands of HDFC Life Insurance, which has an established track record of value creation.”

Mr. Kshitij Jain, MD & CEO, Exide Life Insurance Company Limited said, “This transaction is testimony to the reputation that Exide Life insurance has built of being a well-managed company. We look forward to working closely with the HDFC life team on the proposed transaction. Being part of one of India’s most respected life insurance companies will certainly benefit our customers, employees, agents and partners.

Stock view:

HDFC Life Insurance Company Ltd is currently trading at Rs742.55 down by Rs16.25 or 2.14% from its previous closing of Rs758.80 on the BSE.

Exide Industries Ltd is currently trading at Rs192.30 up by Rs14.05 or 7.88% from its previous closing of Rs178.25 on the BSE.

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