HDFC Life opts for IPO after merger with Max red-flagged
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The board of HDFC Standard Life Insurance Co. Ltd (HDFC Life), a joint venture between mortgage lender HDFC Ltd and UK-based Standard Life Plc, has approved its plan to go for an initial public offering.

The move comes after shareholders failed to agree on a plan of merger with billionaire Analjit Singh-promoted Max Financial Services Ltd that would meet regulatory approvals, the lender informed stock exchanges on Monday.

The firm’s board passed a resolution enabling an offer for sale of up to 20% of shares in HDFC Life.

HDFC owns 61.65% and Standard Life 35% of the insurer while minority shareholders hold the remaining.

A public listing was HDFC Life’s initial plan. Subsequently, HDFC and Max Financial began exploring a merger of their insurance businesses. They, however, failed to get the approval of the Insurance Regulatory and Development Authority of India (IRDA) for the amalgamation.

On Monday, the HDFC Life board did not rule out a future merger with Max Life though it was not specific about a timeline.

“If Max Life and ourselves are able to obtain all necessary regulatory approvals, HDFC Life board and its promoters would be willing to re-evaluate the option of a merger with Max Life in due course," it said.

In November last year, IRDA 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 with the insurance regulator. HDFC Life was slated to consider this revised proposal at the board meeting on Monday.

According to a Mint report last week, the new structure involved creating a separate insurance entity, tentatively named as HDFC Plus, which would have to secure a fresh licence from IRDA.

"At present, no structure prior to an IPO of HDFC Life has been identified which satisfies shareholders' requirements," the company said on Monday.

HDFC Life has already hired merchant banks Morgan Stanley and Credit Suisse to arrange its public listing at the earliest, two persons briefed on the development told VCCircle.

The companies previously considered a tiered merger plan initially involving the amalgamation of Max Life with Max Financial. The life insurance unit was then proposed to be demerged into HDFC Life. Separately, Max Financial was proposed to be merged into another listed company of the Max group – Max India.

The merger would have created India’s largest private-sector life insurer, with annual premium worth Rs 25,500 core, surpassing ICICI Prudential Life Insurance Co. Ltd.

HDFC Life is opting to go public at a time when another insurer SBI Life has filed its draft papers with the capital markets regulator Securities and Exchange Board of India for an initial public offering.

As VCCircle reported in May, simultaneous life insurance IPOs were forcing merchant banks to be choosy as they cannot represent two insurers at the same time.

Last year, ICICI Prudential Life Insurance became the first life insurer in India to go public.

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