Unable to reach mutually acceptable terms, HDFC Life Insurance may have called off its proposed merger with Max group’s life insurance business, according to a report in The Economic Times citing sources.
The two parties were trying to restructure the transaction after the insurance regulator rejected the merger proposal in its current form.
As per the sources quoted in the news report, HDFC Life’s shareholders are keen to push ahead with its IPO plans and a merger is likely to delay that by at least a year.
The three-way merger involving HDFC Life, Max Financial Services Ltd and Max Life Insurance, which was proposed in June last year, was rejected by the Insurance Regulatory and Development Authority (IRDA) in May this year.
Under that plan, Max Life was to amalgamate with parent Max Financial and the resultant entity was to merge with HDFC Life, paving the way for an automatic listing. This was rejected by IRDA on the grounds that an insurance company cannot merge with a non-insurance company as per regulations.
The board of HDFC Life, in its meeting on 17 July, will take a call on the next steps to be taken regarding the merger.
According to recent reports, a new structure is also being worked out wherein Max Life and HDFC Life will merge to form a new company, tentatively called HDFC Plus. This new company will then incorporate a new subsidiary to which it will transfer the insurance business.
“HDFC Life Insurance’s foreign partner, Standard Life Insurance, which owns a 35 per cent stake, is not inclined to wait any more as it wants to list the joint venture at the earliest possible and any alternate merger proposal would have taken another year from now, that too without any assurance (that the deal would go ahead),” said one of the sources.
HDFC Life is a joint venture between HDFC Ltd and Standard Life.