HDFC Life and Max restructure merger

After previous deal was rejected, firms restart the merger process while one prepares for an IPO

HDFC Life and Max restructure merger

Insurance News

By Gabriel Olano

India-based insurers HDFC Life Insurance and Max Life Insurance have come up with a new structure for their potential merger after the previous plan was struck down by the Insurance Regulatory and Development Authority of India (IRDAI).

According to anonymous sources, the insurers have extended the deadline, originally set for June 30, for the transaction’s completion. HDFC Life has also notified its bankers to begin preparations for an initial public offering.

The original complicated merger plan contained a step where Max Life would merge with parent firm Max Financial Services. This was flagged by IRDAI, citing section 35 of the Insurance Act, which prohibits the joining of an insurance company with a non-insurance company. The sources have said that the new plan is much simpler.

“The new structure is something that satisfies Section 35 of the insurance norms, is in compliance with [Securities and Exchange Board of India] regulations and in accordance with the existing taxation norms,” one of the sources told Mint. “We can’t share anything more than this at this stage. Once a decision on the merger (under the new structure) is taken, we will inform the exchanges and will be in a better position to explain the new route planned for the merger.”

The new merger agreement has not yet been signed, and after approval by both firms’ shareholders, it will have to go through a lengthy process of obtaining the nods of IRDAI, SEBI, and the Competition Commission of India, which could take 12-18 months.

In the meantime, HDFC Life seems intent to push through with an IPO, as it continues to work on its requirements for public listing - and is waiting for suitable market conditions to announce it, the sources added.

Related stories:
IRDAI disapproves of Max Life-HDFC merger
Indian life insurer fined for several violations
HDFC, Max Financial merger could create country’s biggest insurer

Keep up with the latest news and events

Join our mailing list, it’s free!