HDFC Life Insurance Company Limited (HDFC Life) on Friday announced the acquisition of Exide Life Insurance Company Ltd (Exide Life) from Exide Industries Ltd for Rs 6,687 crore. The process for merger of Exide Life into HDFC Life will be initiated on completion of the acquisition. The entire process, including the acquisition and subsequent merger, is subject to obtaining the relevant regulatory and other approvals. The Boards of three companies approved the transaction on Friday morning.
The total cost will be met by HDFC Life by issuing 8,70,22,222 shares on preferential basis at a price of Rs 685 per share to Exide Industries and a cash of about Rs 726 crore totaling Rs 6,687 crore.
According to Exide Industries, it has invested a total of Rs 1,679.59 crore in Exide Life. The embedded value of Exide Life, as on 30th June 2021, is Rs 2,711 crore and has been reviewed by Willis Towers Watson Actuarial Advisory LLP. The embedded value of HDFC Life was Rs 27,331 crore. The acquisition is expected to be completed before June 30, 2022.
Post merger of Exide Life with HDFC Life, the shareholding pattern of the latter will be – HDFC Ltd 47.9 per cent, Exide Industries 4.1 per cent and Others 48 per cent.
As to the rationale for acquisition, HDFC Life said, the proposed transaction will accelerate the growth of its agency business.
The Rs 4,937.46 revenue Exide Life with a networth of Rs 1,481.42 crore 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.
Further, Exide Life’s predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10 per cent. Exide Life has 36,710 agents as on June 30, 2021.
Meanwhile, the share prices of HDFC Life came down after opening at Rs 742 on Friday after the deal was announced. The previous day closing price of the scrip was Rs 758. On the other hand, the shares of Exide Industries flared up to Rs 192 after closing at Rs 178.25 on Thursday.
“This is a landmark transaction, 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,” Deepak S. Parekh, Chairman, HDFC Life said.
“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,” Vibha Padalkar, Managing Director & CEO, HDFC Life said.
Rajan B. Raheja, Vice Chairman, Exide Industries and Chairman, Exide Life said, “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.”