Max Life-HDFC Life deal called off

HDFC Life will go ahead with its listing plans, while Max Life will continue on its path to invest in organic and inorganic growth

Based in Delhi, I track developments both in corporate and economy sectors. In a career spanning since 2003, I track developments pertaining to M&A, PE/VC, startups and healthcare. Prior to joining Forbes, I have had stints with The Economic Times, Businessworld, India Today and Indian Express. I am also a guest faculty at The Indian Institute of Mass Communication (Dhenkenal) where I deliver part-time lectures to young aspiring journalists and teach them the practical side of reporting and editing. And when not working, I love to travel and spend time with my fawn Labrador.

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Analjit Singh-promoted Max Financial Services, Max India and Max Life Insurance confirmed that the proposed merger with HDFC Life has been called off. The exclusivity agreement with HDFC Life, valid till July 31, will not be renewed.

The development comes after the insurance behemoths failed to get an approval from the regulator Insurance Regulatory and Development Authority (IRDAI) in June this year, which had prompted them to evaluate alternate structures over the past one month.

“However, the inordinate time associated with finalization and approval of these structures led to this decision,” said Max Group spokesperson in a statement.

It is understood that HDFC Life will now go ahead with its listing plans first and divest up to 20 percent stake through the IPO.

The merger plan of the insurance companies was announced in June last year wherein Max Life was first supposed to merge with the publicly-held Max Financial Services Ltd, which in turn would have merged with HDFC Life, offering it an automatic listing route. It was supposed to be a three-way merger.

However, IRDAI turned down the proposed deal citing Section 35 of the Insurance Act, 1938, wherein an insurance firm is not allowed to merge with a non-insurance firm. Max Financial, in this case, is not technically considered a life insurance firm.

Max Financial Services was created in 2016, as a result of a demerger of the erstwhile Max India, to provide investors specific and undiluted access to the Group’s life insurance business, provide sharper focus to Max Life, and unlock shareholder value.

Going forward, the company will now continue on its path to invest in organic and inorganic growth levers. This will be done through investments in enhancing own channels such as agency and digital, delivering superior policyholder experience, deepening and leveraging existing bancassurance partnerships, and forging new distribution alliances. In addition, it will pursue acquisition opportunities as the industry further consolidates.

If the merger between HDFC Life and Max Life had materialised, it would have created the biggest private sector insurance company in the country. In fact, it would have also paved the way for more such transactions in a grossly under-penetrated insurance market in the country, where mergers and acquisitions (M&As) are key.

Currently, the life insurance industry is dominated by public sector behemoth Life Insurance Corporation (LIC) and life insurance penetration stands at about 3 percent.

In all, there are 24 life insurance players in the industry. In the non-life space, there are as many as 31 players. Till date, the industry has not witnessed too many M&As and many companies that have been in the industry for the past few years are struggling to sustain.

Only two life insurance companies are currently listed—ICICI Prudential and Max Financial Services, the holding company of Max Life. SBI Life, too, is looking to debut on the bourses.


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