India’s third-largest private sector life insurer HDFC Standard Life Insurance Co. Ltd has received approval from the Securities and Exchange Board of India for an initial public offering.
The capital markets regulator issued its final observations on the insurer’s draft red herring prospectus for the IPO on 13 October. This makes the life insurer the 34th company to receive SEBI’s clearance for an IPO this calendar, the SEBI website shows.
HDFC Life, which counts Azim Premji’s private investment arm PremjiInvest as its backer, will be the third life insurer to opt for a public listing. Last year, ICICI Prudential Life Insurance floated the first IPO by a life insurer in India while SBI Life floated its public issue last month.
The firm had filed its DRHP with SEBI on 19 August.
The proposed issue comprises an offer for sale by its joint venture partners – mortgage lender HDFC Ltd and UK-based Standard Life Plc. The two partners will be selling a total of 14.97% stake in the IPO.
The size of the proposed IPO is estimated at Rs 7,000 crore ($1.1 billion). This will be similar to the planned IPO of rival SBI Life Insurance Co.
HDFC Standard Life’s move to go for a public listing comes after its plans for a merger with billionaire Analjit Singh-promoted Max Financial Services Ltd hit a regulatory hurdle.
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, which would have resulted in India’s largest private sector life insurer with an annual premium worth Rs 25,500 core, surpassing ICICI Prudential Life Insurance Co. Ltd.
They, however, failed to get the approval of the Insurance Regulatory and Development Authority of India (IRDA) for the amalgamation.
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.
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.
For the ongoing IPO process, HDFC Life has picked as many as 10 bankers to manage the issue, including eight that were named by VCCircle in July.
Morgan Stanley, HDFC Bank, Credit Suisse, CITIC CLSA and Nomura are the global coordinators and book running lead managers. Edelweiss, Haitong, IDFC, IIFL and UBS are the other merchant bankers involved in the issue.
HDFC Standard Life, which operates under the banner of HDFC Life, was the first private life insurer to be created way back in 2000. Standard Life hiked its stake in the firm two years ago soon after the foreign investment limit in the insurance sector was raised.
In December 2014, PremjiInvest had picked up close to 1% stake in the firm for Rs 200 crore, valuing it at Rs 21,000 crore.