HDFC Life Insurance Completes Acquisition of Exide Life
HDFC Life Insurance announced that it completed the acquisition of 100% stake in Exide Life Insurance from Exide Industries. The deal was struck a few months back and now HDFC Life Insurance has completed all the requisite approvals including the approvals from SEBI, IRDA and also from the Competition Commission of India (CCI).
The deal was first announced in September 2021 with an intent to expand the presence of HDFC Life in the Southern region of India as well as to give an exit to Exide Industries which wanted to exit the insurance business and largely focus on its core batteries and automotive support business.
As part of the deal, HDFC Life will pay Exide a cash consideration of Rs.726 crore. In addition, it will also allot 870.22 lakh shares of HDFC Life at an indicative price of Rs.685 per share. Thus, put together, the total consideration for the transaction adds up to Rs.6,687 crore, which is the price that HDFC Life has paid for full control of Exide Life Insurance.
The next step is to fully merge Exide Life into HDFC Life so that the synergies of the deal can be better realized and they can operate as one entity and one brand. The merger process will commence immediately now that Exide Life has got all the requisite approvals to become a fully owned subsidiary of HDFC Life Insurance.
What is in it for the two parties to the merger. Let us look at HDFC Life first. They get the strong franchise that Exide Life has in the Southern region with a strong focus on Tier-1 and Tier 2 cities. HDFC Life is more of a North based story with a strong presence in the metropolitan Tier-1 cities. This deal gives a much wider reach to HDFC Life.
For Exide Industries, they get cash of Rs.796 crore which can be deployed in its core business. The batteries business is shifting sharply in favour of EVs and needs a lot of investments to be made. In addition, Exide Industries also gets a 4.1% stake in HDFC Life worth Rs.5,691 crore and this will be a good way to keep their participation in insurance alive in the future too, leaving the nitty gritty to a specialized insurance player.
The post pandemic period is a time when insurance business is in a sweet spot and inorganic expansion will pay rich dividends. Earlier, HDFC Life had tried to acquire Max Life but it did not clear the requisite regulatory hurdles after which the deal had to be given up. This deal also sets the tone for more consolidation in the insurance segment in India.
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