India’s largest private insurer HDFC Life Insurance Friday announced that it will acquire 100% stake in Exide Life Insurance in a deal worth Rs 6,687 crore.
“The board of directors of HDFC Life Insurance Company (HDFC Life), Exide Industries and Exide Life Insurance Company… approved the transaction involving the sale of Exide Life Insurance to HDFC Life,” HDFC Life said in a release.
HDFC Life will acquire 100 per cent stake in Exide Life Insurance from Exide Industries via issuance of 8,70,22,222 shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore aggregating to Rs 6,687 crore.
The process for merger of Exide Life into HDFC Life will be initiated on completion of the acquisition, the insurer said in the release.
The embedded value of Exide Life, as on 30th June 2021, is ₹2,711 crore and has been reviewed by Willis Towers Watson Actuarial Advisory LLP, HDFC Life said.
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, it added.
The release said a good quality, predominantly traditional and protection-focused business, will augment the existing embedded value of HDFC Life by approximately 10 per cent.
The biggest insurance deal in the country may spur further consolidation in the sector, which has about 57 firms, including two dozen life insurers.
“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,” HDFC Life Chairman Deepak Parekh said in the release.
HDFC Life Managing Director and CEO Vibha Padalkar said the 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,” she said.
The proposed transaction will give customers access to a wider bouquet of products and service touch points.
Exide Life has a strong foothold in South India, especially in tier 2 and 3 towns.