HDFC Life Acquires Exide Life in a Rs 6,687-crore Cash and Stock Deal

HDFC Life Insurance on Friday said that it is buying the life insurance unit of battery maker Exide Industries Ltd in a Rs 6,687 -crore deal. With the acquisition, HDFC Life Insurance is aiming to increase its customer base.  As part of the cash and stock deal, HDFC Life will issue 87 million shares to Exide Industries at 685 rupees per share and a cash payout of Rs 72.6 crore, HDFC Life said in a regulatory filing.

In the regulatory statement, HDFC Life Chairman Deepak Parekh said, “It (the deal) would enhance insurance penetration and further our purpose of providing financial protection to a wider customer base.”

While the insurer said that the acquisition is expected to complete by June 30, 2022, it added that the completion of the acquisition is subject to customary conditions such as receipt of regulatory and other such approvals. Once the deal is completed Exide Life Insurance will be merged into HLIC, the process for which will be started after the completion of the acquisition.

“We believe that the transaction can result in value creation for customers, employees, shareholders and distribution partners. This transaction will provide an opportunity for HLIC and the Target (Exide) to realise synergies arising out of complementary business models,” stated HDFC Life.

“The Company will obtain all approvals as may be required under applicable laws from any regulatory authority for completion of the proposed transaction, including from the Insurance & Regulatory Development Authority of India and the Competition Commission of India,” it said. Exide Life Insurance was incorporated on December 13, 2000. It had a turnover of Rs 2,886 crore in FY19, Rs 3,220 crore in FY20 and Rs 3,325 crore in FY21.

Due to this acquisition, the insurers will be able to avail access to a wider to a wider bouquet of products and service touch-points. On the other hand, Employees and agents will benefit from a larger, stronger organisation. This transaction between HDFC Life and Exide Life will give a push to their growth story as Exide Life will complement HDFC’s geographical presence. In the past, there have been reports of HDFC Life  intending to acquire Max Life Insurance, but the deal did not pass through the regulatory hurdles.

Exide Insurance has a strong  presence in South India, especially in Tier 2 and 3 towns. So from business perspective, this transaction will provide an access to a wider market and will pave the way for the growth of the company.  One thing to know is that HDFC Life has a market share of 8 per cent as of 31 July in terms of new business premium while Exide has a market share of 0.34 per cent. However, this deal has not been able to enthuse the investors on Dalal Street, as the scrip of HDFC Life fell 3 per cent and those of Exide Industries were up 7 per cent as of 1135 hours IST on Friday.

The closure of the proposed transaction will be subject to approval by relevant regulators including the Insurance  Regulatory and Development Authority of India (IRDAI), Competition Commission of India (CCI), National Company Law Tribunal  (NCLT), stock exchanges and approval by the shareholders of HDFC Life and Exide Industries.

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