HDFC Life Insurance, the country’s largest private-sector life insurance company, is acquiring rival Exide Life Insurance in a share and cash deal, that it says will help accelerate the growth of HDFC Life’s agency business and strengthen other distribution channels including broker, direct and cooperative banks.
HDFC Life will acquire a 100 per cent stake in Exide Life Insurance from Exide Industries by issuing 8,70,22,222 shares at an issue price of Rs 685 a share and a cash payout of Rs 726 crore aggregating to Rs 6,687 crore.
The company will also initiate a process to merge Exide into itself once the acquisition is complete.
“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,” it said on Friday.
The embedded value of Exide Life, as of June 30, 2021, is Rs 2,711 crore and has been reviewed by Willis Towers Watson Actuarial Advisory, HDFC Life said. The embedded value of a life insurance company is the addition of the net asset value of the firm and the present value of future profits.
“HDFC Life’s scale, market-leading digital and product innovation capabilities and prudent risk management strategy will aid in optimising cost and over time, achieve higher margins for the acquired business,” said the company.
A good quality predominantly traditional and protection focussed business will augment the existing embedded value of HDFC Life by about 10 per cent, it further added. “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,” said Vibha Padalkar, MD and CEO of HDFC Life.
Exide Life Insurance is a fully owned subsidiary of Exide Industries, a leading player in automobile batteries. It had started operations in 2001 as ING Vysya Life Insurance. It was renamed Exide Life Insurance in 2014 after the ING group exited the life insurance business in India.
“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,” said Rajan Raheja, vice-chairman of Exide Industries and chairman of Exide Life.
Shares of Exide Industries surged on the announcement and were trading 8 per cent higher at Rs 192.15 on the BSE on Friday morning. HDFC Life was down 2.2 per cent to Rs 742.35.