Billionaire Analjit Singh-promoted Max Financial Services Ltd and mortgage lender Housing Development Finance Corporation may need to revisit the terms of the merger of their life insurance businesses after the Insurance Regulatory and Development Authority of India (IRDAI) reaffirmed its objections to the transaction in its current form.
Max Financial and HDFC had agreed to merge their life insurance arms in August last year. But the plan hit a road block in November last year when the IRDAI expressed reservations citing lack of provisions for such a merger. The regulator has now reiterated its reservations.
Max Financial said in a statement to stock exchanges on Thursday that HDFC Standard Life Insurance Company Ltd and Max Life Insurance Company Ltd remain committed to the merger and that the companies are evaluating various options. It didn’t specify what those options were.
Last month, Max Financial had said in a disclosure that the merger might take nine to 12 months after the IRDAI’s approval.
However, in the light of reservations on the structure of the merger, HDFC Life may look to float a share sale.
The planned merger involved the amalgamation of Max Life with Max Financial Services. For this, the shareholders of Max Life would get one share each of Max Financial for approximately five shares of Max Life. The life insurance unit would then be demerged into HDFC Life. Separately, Max Financial would be merged into another listed company of the Max group – Max India.
If approved, the merger would create India’s largest private sector life insurer, with annual premium worth Rs 25,500 crore, surpassing ICICI Prudential Life Insurance Co. Ltd. It will be second only to state-run Life Insurance Corp. of India, which has a 70% share of new business premium in the country.