HDFC Life will acquire a 100% stake in Exide Life Insurance from Exide Industries via issuance of 87.02 million shares at an issue price of ₹685 per share, and a cash payment of ₹725 crore
Shares of HDFC Life Science Ltd dropped 4% on Friday after the firm said it will acquire Exide Life Insurance in a deal worth ₹6,887 crore.
The stock hit a low of ₹728.55 on the BSE. At 12.05pm, the scrip was at ₹734.05 on BSE, down 3.3% from its previous close. HDFC Life stock had been trading higher for nine consecutive sessions and rose nearly 14% during this period.
Meanwhile, shares of Exide Industries Ltd soared 7.2% to ₹191 a share.
Earlier, HDFC Life had intended to acquire Max Life, but the deal did not go through due to regulatory hurdles.
HDFC Life will acquire a 100% stake in Exide Life Insurance from Exide Industries via issuance of 87.02 million shares at an issue price of ₹685 per share, and a cash payment of ₹725 crore, it said.
The process for the merger of Exide Life into HDFC Life will be initiated after the deal is closed.
The biggest insurance deal in the country may spur further consolidation in the sector, which has about 57 firms, including two dozen life insurers. The government’s move, earlier this year, to allow foreigners to own more of local insurers, and an increase in demand for medical and life coverage after the pandemic ravaged the country is likely to prompt larger firms to seek more such transactions.
“Life insurance is a fixed cost intensive business and one needs size, distribution network and high operating level to ensure profitability," said Santosh Singh, senior vice-president and head of research at Motilal Oswal Asset Management Co. “That is why small size players are not able to cope in the market."