Three people familiar with the talks said parleys have so far been mostly between Deepak Parekh, chairman of Housing Development Finance Corp, HDFC Life's parent, and Analjit Singh, founder of Max Group which owns majority stake in Max Life. The companies may announce the plans in the next few days.
If talks fructify, the merger will be the first among life insurers in more than a decade, creating a firm with market value of about Rs 50,000 crore, ahead of ICICI Prudential. It will, however, remain a distant second to state-run LIC which dominates the Rs 25 lakh crore industry with 70% share.
The board of HDFC Life is meeting in Mumbai on Friday to discuss the proposal. HDFC and Max India did not respond to email queries on the matter. Standard Life, the joint venture partner in HDFC Life, in an email response said it does not comment on market speculation. Max Life's minority stakeholder, Mitsui Sumitomo, said it would prefer to refrain from commenting on the query.
Since the two companies have different holding structures, it is not clear what the final holding pattern would be. Max Financial owns 68.01% of Max Life and has a market value of Rs 11,700 crore. Axis Bank owns 5.99% and Mitsui Sumitomo owns the remaining 26%. In HDFC Life, HDFC owns 61.63% and UK's Standard Life 35%. About 1% is owned by Azim Premji.
The talks have reached a stage where companies have appointed legal and due diligence advisors. Consultancy firm EY did the due diligence for Max Life and Shardul Shroff was the legal advisor to HDFC Life. But there is no certainty that it will take place as a number of hurdles remain to be crossed.
One of the valuation metrics for insurers is embedded value. HDFC Life had an embedded value of Rs 10,205 crore at the end of March 31, 2016. It had an asset under management of Rs 74, 247 crore.
Source: Economictimes.
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