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Insurance Regulator IRDAI Expresses Reservations On HDFC-Max Life Merger

IRDAI’s speedbreaker to the HDFC-Max merger deal

Signage for HDFC displayed in Mumbai (Photographer: Adeel Halim/Bloomberg) 
Signage for HDFC displayed in Mumbai (Photographer: Adeel Halim/Bloomberg) 

India’s insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has expressed reservations on the merger of Max Life Insurance Co. Ltd., and Max Financial Services Ltd., into HDFC Life in its current form.

In its filing to the exchanges, HDFC Standard Life Insurance Company, a subsidiary of private lender HDFC, said that the IRDAI expressed its reservations over the scheme of amalgamation filed by the companies in September this year.

HDFC and Max Life had signed a deal in August 2016 to create India’s largest private insurer with the total premium of the merged entity expected to be nearly Rs 26,000 crore and assets under management will top Rs 1 lakh crore, according to a joint press release. In the private life insurance space, only ICICI Prudential Life Insurance had reported AUM of Rs 1 lakh crore.

Under the two-step process, Max Life will first merge with its parent company Max Financial Services. Then, the life insurance business will be de-merged from Max Financial into HDFC Life.

The deal envisages shareholders of Max Life getting one share of Max Financial for every 4.98 shares of Max Life. In the second step, shareholders of Max Financial (post the amalgamation with Max Life) will get 2.33 shares of HDFC Life for each share they hold, the joint statement said. (More details HERE)

While the company did not mention what reservation the insurance regulator has expressed, it did say that it is ready to clarify on any matter.

The company believes that the scheme of arrangement as submitted to the IRDAI is in compliance with all applicable laws and proposes to represent and clarify the matter to IRDAI. 
HDFC Standard Life’s Statement To The Exchanges.