HDFC Life's IPO plan put on hold post-merger deal with Max

Mumbai, Jun 17 () HDFC Standard Life has put on hold its IPO plan after announcing takeover of

Max Financial Services

, a listed company, and

Max Life

Insurance. HDFC

Standard Life

today proposed to merge Max Life and

Max Financial

with itself. As per the deal, there would be two schemes of amalgamation. First, Max Life will merge into Max Financial and then the merged entity would amalgamate into HDFC Life. The company that would exist would be HDFC Life, which will automatically get listed on stock exchanges as it has merged a listed entity with itself. No cash would change hands as it will be a pure share swap that would be determined after the valuation is done. "The IPO plan of HDFC Life has been temporarily put on hold until the due diligence of this deal is done to ascertain whether it will go through or not", HDFC Chairman Deepak Parekh told the media here. "We believe there are significant benefits of a potential combination and if this materialises, it could make the consolidated entity the largest private life insurer in the country." Parekh said further: "The top four private insurers today constitute 65 per cent of the private insurance market, while the remaining 19 have a combined market share of 35 per cent. Both HDFC Life and Max Life have, over the years, followed a strategy of consistent and responsible growth to create value for their respective customers and stakeholders." The merger will create the largest private insurance company with assets under management of over Rs 1 lakh crore and premia of around Rs 26,000 crore. ICICI

Prudential Life

is the current market leader among private insurers with total assets under management at around Rs 1 trillion. Edinburgh-based Standard Life holds 35 per cent stake in HDFC Life, in which HDFC owns 61.63 per cent. Total premium of HDFC Life for 2015-16 was Rs 16,313 crore and AUM stood at Rs 74,247 crore. Max Life is a JV with

Mitsui

Sumitomo Insurance Co. Max Financial owns 68 per cent in Max Life and Mitsui 26 per cent. Max Life's total premium collection in FY16 was Rs 9,216 crore with an AUM at Rs 35,824 crore. "Both have strong new business margins. HDFC Life's post overrun new business margins is 19.8 per cent whereas Max Life is 17.9 per cent,"

Parekh

said. "We said we have three options - stay where you are; go out and consolidate or acquire a smaller company with less operating experience or merger performance. If you draw a line after the first six or seven companies, the others sort of fall away almost,"

Max Group Founder

and Chairman Emeritus

Analjit Singh

said. (MORE) KD RSY ARD
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