How much will HDFC Life pay for buying Exide Life and will this help HDFC Life expand its presence?
Answer
Answer
HDFC Life Insurance has picked up 100% stake in Exide Life Insurance, which is wholly owned by Exide Industries, the popular manufacturer batteries in India. The total consideration for the deal will be Rs.6,687 crore. It will be cash plus stock deal in which HDFC Life will issue 870.22 lakh shares of HDFC Life to Exide Industries at Rs.685 per share worth Rs.5,961 crore. On top of that, HDFC Life will also pay cash of Rs.726 crore.
At a broad level, I think there are 2 reasons why this acquisition of Exide Life will add value to HDFC Life. Remember, that the penetration level of insurance today is just 2.82%, which is much lower than most of Asia, Latin America and Eastern Europe. Also LIC is likely to get strengthened post the IPO and HDFC Life needs a much bigger network to take on the challenge posed by LIC. HDFC Life is already the largest private life insurer in India.