HDFC Life’s merger scheme with Max derails IPO plans

HDFC Standard LifeHDFC Life’s plan to merge with Max Life Insurance and Max Financial Services has effectively put HDFC Life IPO on hold. The board of HDFC – life insurance firm’s parent – approved the HDFC Life IPO just a couple of months back and had appointed Citigroup, JP Morgan, Morgan Stanley and Kotak Mahindra Capital to manage the offer. Since Max Financial is already listed on Indian bourses, it is likely that it will be used as a holding company for the combined entity. Max Financial and HDFC recently agreed to explore a merger of their insurance businesses.

Read Also: HDFC Standard Life IPO gets board approval from parent

Our shareholders continue to be keen to get the shares listed but the merger will also get us automatically listed. As you know, we had started the process for the IPO — appointed bankers. Now when we are working on this deal, that process will be put on hold

– Deepak Parekh, Chairman, HDFC

HDFC was looking to raise at least INR20 billion (INR2,000 crore) through the IPO of its life insurance arm. Earlier in April, the financial services giant pared its shareholding in HDFC Standard Life by selling 9% equity stake to partner Standard Life. Currently, HDFC holds 61.65% in HDFC Standard Life while Standard Life owns 35%. On the other hand, Max Life Insurance is a joint venture between Max Financial Services and Mitsui Sumitomo Insurance with the latter holding 25%. Max Financial Services, the listed entity of Analjit Singh’s group, is the holding company of Max Life Insurance.

Parekh mentioned that discussions regarding merger were underway for nearly two weeks before a formal announcement was made. Both parties are yet to work out finer aspects of proposed merger, including the final shareholding for the foreign investors in both companies. However, the foreign partners seem to have given their go ahead to the merger. “We still have to work out the ratios and shareholding but both these partners have blessed our discussions which have been on for the last couple of weeks,” said Parekh.

HDFC was planning to list the insurance venture for over a year. The HDFC Life IPO would have set a benchmark for other insurance players hopeful of listing their shares on exchanges. This includes ICICI Prudential Life, SBI Life Insurance, Canara HSBC Oriental Bank of Commerce Life Insurance, Aviva India Life Insurance, and Max Bupa Health Insurance. ICICI Prudential Life is ahead of its peers in making progress towards a stock market listing and has appointed Bank of America Merrill Lynch and ICICI Securities as bankers to manage the offer.

Read Also: Lead bankers appointed for ICICI Prudential Life IPO

Vipin Mathur

By working in multiple cultures and segments of various organizations, Vipin has earned 15 years of experience in managing and organizing different operations. Most recently, he is associated with IPO Central as CEO. At IPO Central, he plays a leading role in management and operational practices. He also guides authors and researchers about the latest trends and news of upcoming IPOs.

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