HDFC Life on Friday said that it would acquire a 100 per cent stake in Exide Life Insurance Company for Rs 6,887 crore from Exide Industries (EIL). Exide Life would be subsequently merged with HDFC Life, subject to regulatory approvals, HDFC Life said in a statement on Friday. 

This marks one of the first and largest acquisitions in the life insurance segment, which has 23 private players and a State-owned insurer – Life Insurance Corporation of India (LIC). Previously, HDFC Life had intended to acquire Max Life, but the deal did not go through because of regulatory hurdles. Experts said that this deal, however, is not expected to face any such regulatory hurdles. 

Reliance Capital, a subsidiary of the Anil Dhirubhai Ambani Group, had acquired the entire stake in AMP Sanmar from Australian insurer AMP and the Sanmar Group in October 2005 for a little over Rs 100 crore. HDFC Life’s proposed acquisition will mark the first purchase in the past 16 years in the life insurance segment.  

Of the Rs 6,887 crore that HDFC Life will be paying to acquire Exide Life Insurance, Rs 725 crore will be payable in cash and the balance by issuing 8.70 crore equity shares of face value of Rs 10 each, issued at Rs 685 per share to EIL, the holding company of Exide Life. EIL’s total investment in Exide Life as on date has been Rs 1,679.59 crore. 

After the acquisition, EIL will hold a 4.1 per cent stake in HDFC Life, and mortgage lender HDFC, which holds 49.9 per cent stake in HDFC Life, will see its stake coming down to 47.9 per cent. 

In a statement, HDFC Life, one of the largest private insurers, said: “The proposed transaction will accelerate the growth of the agency business of HDFC Life. Exide Life complements HDFC Life’s geographical presence and has a strong foothold in south India, especially in tier-II and -III towns, thus providing access to a wider market.”