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HDFC Life to launch IPO; puts merger with Max Life on hold

NEW DELHI: HDFC Life has hired Morgan Stanley and Credit Suisse to raise as much as Rs 10,000 crore in an IPO and has scrapped plans of a merger with Max Life after nearly a year of negotiations, two people close to the decision said.

The country’s third-biggest private insurance company intends to sell 20 per cent in the initial share sale, valuing it at Rs 50,000 crore, these people who did not want to be identified said.

This would make it the third major life insurer heading to stock exchanges after ICICI Prudential Life, which listed last September, and SBI Life which has filed an offer document with the markets regulator.

The HDFC Life issue will comprise part sale of stake by Housing Development Finance Co, the largest holder with 61.63 per cent stake.

There could be some new share sale too which would boost its solvency ratio. Its joint venture partner, Standard Life of the UK, may also sell some shares though it is not clear at this point.

HDFC Life could not be immediately reached for comment but a board meeting on Monday evening cleared the proposal.

ET was the first to report, in its edition dated July 14, that HDFC plans to call off its merger and push ahead with its IPO plans. For HDFC Life, listing on stock exchanges has come a full circle.

The company, which had announced listing plans, changed its plans last year and decided to merge with the New Delhi-based Max Life in a complicated structure.

But the proposal was struck down by Insurance Regulatory and Development Authority of India.

HDFC Life and Max Life proposed a four-leg merger last August where in the first leg, Max Financial Services, a holding company, was to be merged with Max Life.

That was to be followed by a demerger of the life insurance business, which would subsequently be merged with HDFC Life.

“In the event if the proposed structure is not approved, we will see if we can quickly rework the structure,” Keki Mistry, vice-chairman, HDFC had told ET in May this year.

“If for whatever reasons the structure is not going through, we can do an IPO. We had done a lot of preparedness on IPO when the deal was brought to us last year.”

In fiscal 2017, HDFC Life’s profit after tax rose 9 per cent to Rs 892 crore. Its assets under management rose 24 per cent to Rs 91,742 crore in the same period.

The company would be joining SBI Life which also aims to list on stock exchanges this year. It plans to raise about Rs 7,000 crore which would give it a market value of nearly Rs 58,000 crore.

In 2015, HDFC had sold 9 per cent in the life insurance business to Standard Life for Rs 1,700 crore, valuing the business at about Rs 19,000 crore, or about 1.9 times the estimated embedded value for 2015-16.