Exide Industries jumps on divestment of life insurance biz

Exide Industries surged 6.87% to Rs 190.50 after HDFC Life Insurance Company announced the acquisition of Exide Life Insurance. The board of directors of HDFC Life Insurance Company (HDFC Life), Exide Industries and Exide Life Insurance Company (Exide Life) approved the transaction involving the sale of Exide Life Insurance to HDFC Life.

HDFC Life will acquire 100% stake in Exide Life Insurance from Exide Industries via issuance of 8,70,22,222 shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore, aggregating to Rs 6,687 crore.

The process for the merger of Exide Life into HDFC Life will be initiated on completion of the acquisition. The entire process, including the acquisition and subsequent merger, is subject to obtaining the relevant regulatory and other approvals.

The proposed transaction will accelerate the growth of the agency business of HDFC Life. Exide Life complements HDFC Life’s geographical presence and has a strong foothold in South India, especially in Tier 2 and 3 towns, thus providing access to a wider market.

Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10%. The synergy will enhance shareholder value with the potential to improve new business margins via operating leverage and product mix optimisation.

The acquisition is expected to be completed before 30 June 2022. The closure of the proposed transaction will inter alia be subject to approval by relevant regulators including the Insurance Regulatory and Development Authority of India (IRDAI), Competition Commission of India (CCI), National Company Law Tribunal (NCLT), stock exchanges and approval by the shareholders of HDFC Life and Exide Industries.

Shares of HDFC Life dropped 3.15% to Rs 734.90 on BSE. As on 30 June 2021, HDFC Life had 37 individual and 13 group products in its portfolio, along with 7 optional rider benefits, catering to a diverse range of customer needs.

Exide Life Insurance Company is a 100% owned subsidiary of Exide Industries. It manages a customer base of 11.9+ lakhs and assets over Rs. 18,781 crores (as on 30 June 2021). During the financial year 2020-21, the company achieved a total premium income of over Rs 3,325 crore. The agency channel comprises of 36,700+ advisors and has presence spread across the country through a wide 200+ branch network.

Exide Life reported turnover (total premium for FY 2020-21) of Rs 3,325 crore. As of 30 June 2021, its AUM stood at Rs 18,780 crore while its embedded value (as on 30 June 2021) was at Rs 2,711 crore.

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