HDFC Life is on its way to acquire Excide Life Insurance Co. and its subsequent mergers in a deal valued at 6687 Crore rupees.
Biggest Insurance deal in India:
According to the Bloomberg reports, India’s largest Private insurer: HDFC Life Insurance Co., on Friday announced to enhance its distribution of products all over the country, and in that process, it decides to acquire a 100 per cent stake in Excide Life Insurance Co. with a deal valued at Rs. 6,687 Crore or 66.87 Billion.
Of its 66.87 Billion, 7.25 Billion will be paid in cash. After the entire acquisition process, Excide Life will merge with HDFC Life and become a branch of it.
According to Vibha Padalkar, managing director and chief executive officer of HDFC Life, this business deal after Excide Life will become their subsidiary, make them more profitable and provide them with better control over insurances.
The agreement is framed in two stages, and the Company expects to complete the first stage in five months.
Padalkar admitted that they were seeking this opportunity for quite a while.
“While we have continued to grow faster than the overall life insurance market, we have been seeking opportunities to supplement that with inorganic growth”. Padalkar added.
HDFC’s earlier quest to acquire Max Life:
Before this business deal with Excide Life, HDFC went on acquiring Max Life. However, the value did not succeed due to various regulatory hurdles.
About Excide Life Insurance:
Excide Life Insurance is a unit of Excide Industries Ltd., which is a renowned battery manufacturing company.
Excide Life Insurance was founded on December 13, 2000. In FY19, the Company earned Rs 2,886 Crore, Rs 3,220 Crore in FY20, and Rs 3,325 Crore in FY21.
Excide life possesses a better control of the business over Southern India
According to the reports, Excide Industries invested around 16.79 Billion in Excide Life.
Impact of this merge:
On Friday, the share price of Excide Industries soared lover 14% to a day’s high of Rs. 202.95 per share on the BSDE intraday market.
This parent company’s stock has risen due to this 100% stake sale of its insurance business to HDFC Life Insurance, which was declared via exchange.
The proposed merger will help HDFC Life’s Agency business grow faster.
Excide Life complements HDFC Life’s geographic reach by having a solid presence in South India, particularly in Tier 2 and 3 towns, allowing access to a larger market.
Improved quality of financial protection
Customer service will improve due to its more comprehensive network.
The customers, its shareholders, employees, and distribution partners will also benefit from its broader customer base.
Enable both the companies to discover synergies between two comparable business models in 18-24 months.
New business margins will improve. Excide Life’s agent productivity and persistence could also get enhanced slightly.
When will this come into effect?
Merging of Excide Life into HDFC Life will come into effect after its complete acquisition. HDFC expects it to get completed by June 30, 2022.
According to the senior vice-president and head of research at Motilal Oswal Asset Management Co., small-size players cannot cope in the market.
In this life insurance business, one requires improved distributary networks, a larger size and a higher level of functioning to succeed.
