Mortgage lender Housing Development Finance Corporation Ltd and its UK-based joint venture partner Standard Life Plc will sell a total of 15% stake in HDFC Standard Life Insurance Company Ltd via the life insurer's planned initial public offering.
The board of HDFC Standard Life has approved the sale of nearly 300 million shares via an offer-for-sale in the IPO, HDFC said in a stock-exchange filing on Friday.
Parent company HDFC will sell 191.24 million shares representing a 9.57% stake whereas Standard Life will sell 108.58 million shares, resulting in a 5.43% stake dilution for the foreign JV partner.
Currently, HDFC holds 61.52% in the life insurance firm and Standard Life owns 35%. Other shareholders, including Azim Premji’s family office PremjiInvest and company employees, hold about 3.5%.
HDFC Standard Life, which is targeting to float the IPO by the end of 2017 or early 2018, has already picked merchant bankers, people privy to the information had told VCCircle.
The proposed IPO is estimated at Rs 7,000 crore ($1.1 billion), similar in size to the planned IPO of rival SBI Life Insurance Co, which has also picked merchant bankers. It filed its draft papers with the capital markets regulator Securities and Exchange Board of India (SEBI) last week.
HDFC Standard Life joins a growing list of Indian insurance companies—general and life—that have either firmed up plans to go public or already floated an IPO. The names include state-owned National India Assurance and General Insurance Corporation of India, besides ICICI Lombard General Insurance Co and Reliance General Insurance Co.
Last week, HDFC approved a board resolution enabling an offer-for-sale of up to 20% of shares in HDFC Life as shareholders could not reach an agreement on a merger plan with Max Financial that would satisfy regulatory requirements.
A public listing was HDFC Life’s original plan. Subsequently, HDFC and Analjit Singh-promoted Max Financial Services Ltd began exploring a merger of their insurance businesses. They, however, failed to get the approval of the Insurance Regulatory and Development Authority of India.
Although HDFC Standard Life is now planning an IPO, it has not ruled out the option of a future merger with MaxLife, it had informed the stock exchanges last week.
In November last year, the insurance regulator had expressed reservations over a possible merger, citing lack of provisions for such an amalgamation under the existing terms and conditions. After IRDA raised objections, both the companies said they would file a revised merger structure.
According to a Mint report, the new structure involved creating a separate insurance entity, tentatively called HDFC Plus, which would have had to secure a fresh licence from IRDA.
A merger between HDFC Standard Life and Max Life would have created India’s largest private-sector life insurer, with annual premiums worth Rs 25,500 crore, surpassing ICICI Prudential Life Insurance Co. Ltd.
ICICI Prudential Life Insurance became the first life insurer in India to go public last year.