Mumbai: HDFC Life Insurance on Friday said it will acquire 100 per cent stake in Exide Life Insurance from Exide Industries in a deal amounting Rs 6,687 crore.
The board of directors of HDFC Life Insurance, Exide Industries and Exide Life Insurance, at their respective meetings held on Friday, approved the transaction involving the sale of Exide Life Insurance to HDFC Life, HDFC Life said in a statement.
HDFC Life Managing Director and CEO Vibha Padalkar said, "While we continue to grow faster than the overall life insurance market, we have always been actively taking opportunities to supplement that with inorganic growth."
She added that in line with this thought process, the company is pleased to announce the acquisition of 100 per cent stake in Exide Life Insurance from Exide Industries. "The acquisition is being done via issuance of 87 million shares at an issue price of Rs 685 per share and the cash payout of Rs 726 crore, aggregating to Rs 6,687 crore."
HDFC Life Chairman Deepak Parekh said this is a landmark transaction and the 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," Parekh said in the statement.
The closure of the proposed transaction is subjected to various regulatory approvals including from the Insurance Regulatory and Development Authority of India (Irdai), Competition Commission of India (CCI), National Company Law Tribunal (NCLT), stock exchanges and by the shareholders of HDFC Life and Exide Industries, the statement said.
Padalkar said that upon completion of the transaction, Exide Industries will hold a 4.1 per cent stake in HDFC Life.
The transaction is expected to be a two-step process with merger of Exide Life into HDFC Life being initiated on completion of its acquisition, she said.
She added that the transaction will bring down HDFC Life's solvency margin to 180 per cent from the current level of 222 per cent as there will be cash payout.
"But, having said that, this is likely to be five-six months down the line and our profits will also continue to get generated, which will add to our solvency.
"If profit is not added, then our solvency will be down by 15 per cent and thereby our solvency will be close to 180 per cent on a standalone basis," Padalkar said.
The proposed transaction will strengthen HDFC Life's distribution network and give customers access to a wide variety of products and sales and service touch points, she said. Exide Life has a strong foothold in South India, especially in tier-2 and -3 towns.
The deal will accelerate the growth of the agency business of HDFC Life. As part of the deal, HDFC Life will be allowed to use Exide brand for two years, she said.
"On successful completion of this transaction, Exide Life will add 40 per cent to the topline (revenue) of HDFC Life's agency business and 35 per cent to our agent base," Padalkar said.
A good-quality, predominantly traditional and protection-focussed business will augment the existing embedded value of HDFC Life by about 10 per cent, the statement said.
She added that after the completion of the deal, the private market share of HDFC Life is expected to get a boost of over one per cent, and asset under management (AUM) is likely to increase by around 10 per cent.
Bengaluru-headquartered Exide Life commenced operations in 2001-02.
In 2020-21, the company achieved a total premium of Rs 3,325 crore. As of June 30, its asset under management stood at Rs 18,780 crore and the embedded value at Rs 2,711 crore.