Bengaluru: HDFC Life Insurance will buy battery maker Exide Industries' life insurance unit for 66.87 billion rupees ($915.50 million) in one of India's largest insurance deals, as it seeks to increase its customer base.
The deal will help HDFC Life, the country's largest private-sector insurer, strengthen its foothold in south India. India's life insurance penetration stood at 2.82% in 2019, according to the latest annual report from the country's insurance regulator.
The deal comes at a time when competition in the sector is heating up and the country gears up for the initial public offering of state-owned insurer Life Insurance Corp of India, which controls the largest chunk of the market.
Analysts say the deal could come as a precursor for further consolidation in the sector as companies jostle for market share and as demand for insurance increases amid the pandemic.
"There are many small players in the market, so we could see more consolidation in the sector for benefits of scale as competition increases," Kajal Gandhi, vice president at ICICI Securities, said.
Exide Industries' shares surged 15% after the deal, while HDFC Life fell as much as 4.2%.
As part of the deal, HDFC Life will issue 87 million shares to Exide Industries at 685 rupees per share and pay 7.26 billion rupees in cash, HDFC Life said in a regulatory filing https://www.bseindia.com/xml-data/corpfiling/AttachLive/6d39f86a-c233-4140-8aa2-3830fafa991a.pdf.
Exide Life had a customer base of 1.2 million and assets of more than 187.81 billion rupees, as of June 30. The company will be merged with HDFC Life once the deal closes.
Exide Industries, India's largest manufacturer of lead-acid storage batteries, has till date made a total investment of 16.8 billion rupees in its life insurance business.