HDFC Life to go ahead with IPO before merger with Max Life Insurance

HDFC Standard Life Insurance CEO Amitabh Chaudhry says will file application with IRDA on Tuesday for the IPO, reiterates commitment to a potential merger with Max Life Insurance

HDFC Standard Life Insurance Co. Ltd’s board on Monday approved a proposal to sell as much as 20% of the insurer through an initial public offering (IPO) even as it reiterated its commitment to a potential merger with Max Life Insurance Ltd at a later date.

“We will file an application with IRDA (Insurance Regulatory and Development Authority of India) tomorrow (Tuesday) for an IPO and we expect an approval within 30-45 days,” said Amitabh Chaudhry, managing director and chief executive officer of HDFC Standard Life, in an interview after the company’s annual general meeting late on Monday evening.

HDFC Standard Life is a joint venture between Housing Development Finance Corp. Ltd and Edinburgh-headquartered Standard Life Plc.

“We have kept the option for the proposed merger with Max Life open,” said Chaudhry. “We still feel there is a lot of synergy in the merger and will benefit both the companies. The IPO should happen before December.”

So, the merger may potentially happen after the IPO if the new merger structure is approved by the regulators, said an HDFC Standard Life official who spoke on condition of anonymity.

HDFC Standard Life had started preparing for a public offering last year but later put it on hold as merger talks gained momentum.

It is expected to hire investment banks in the next few days to manage the initial share sale.

Mint had reported in June that HDFC Standard Life had informally reached out to a few domestic and foreign investment banks for its IPO plans after IRDA earlier that month rejected the original three-step merger plan citing legal violations.

The insurance regulator had declined to approve the structure—which envisaged Max Life Insurance merging with Max Financial Services in the first step—citing a breach of norms under section 35 of the Insurance Act, which bars the merger of an insurance company with a company that is not in the insurance business.

The two companies had, however, mutually extended the merger deadline from 30 June to explore alternative merger structures and were considering the merger of Max Life and HDFC Life, both unlisted entities, to create a new company, to be tentatively called HDFC Plus. This new company will then incorporate a new subsidiary to which it will transfer the insurance business.

However, the new structure would have needed fresh shareholder approval, besides approvals from IRDA, the Securities and Exchange Board of India and the Competition Commission of India.

Since the new amalgamation scheme could take anywhere between 12 and 18 months, HDFC Standard Life will continue working on its listing plans and announce an IPO when the market is suitable.
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Item Reviewed: HDFC Life to go ahead with IPO before merger with Max Life Insurance Rating: 5 Reviewed By: PRASHANT ENTERPRISES