Exide Industries’ shares touched a high of Rs 202.95, up 14% in early morning sessions, following the company’s complete divestiture of its whole investment in Exide Life Insurance Company to HDFC Life Insurance Company for a total consideration of Rs 6,687 crore. Exide Life Insurance Company is a wholly owned subsidiary of Exide Industries in a significant way.
HDFC Life, on the other hand, fell 4% to Rs 728.55 on the BSE due to profit booking. On Thursday, the stock reached a record high of Rs 775.65. Until yesterday, the stock had surged 14% over the previous nine trading days.
At their respective meetings today, the boards of directors of HDFC Life, Exide Industries, and Exide Life authorised the transaction involving the sale of Exide Life Insurance to HDFC Life. HDFC Life will acquire Exide Life Insurance in its entirety from Exide Industries through the issuance of 87 million shares at a price of Rs 685 per share and a cash distribution of Rs 726 crore, totaling Rs 6,687 crore.
Exide Life will be merged into HDFC Life upon conclusion of the acquisition. According to a joint press release, the entire process, including the acquisition and eventual merger, is subject to regulatory and other approvals.
“The proposed deal will help HDFC Life accelerate the growth of its Agency business. Exide Life complements HDFC Life geographically and has a strong presence in South India, particularly in Tier 2 and Tier 3 cities, allowing access to a broader market. Customers will benefit from a more robust product portfolio, a broader distribution network, and increased service touch points. Synergies to increase shareholder value, including the ability to increase new business margins through operational leverage and product mix optimization “According to the corporation.
Additionally, a high-quality, largely traditional and protection-focused business will add roughly 10% to HDFC Life’s existing embedded value. Exide Life’s embedded value as of 30 June 2021 is Rs 2,711 crore, as determined by Willis Towers Watson Actuarial Advisory LLP.
The company stated that HDFC Life’s scale, market-leading digital and product innovation capabilities, and prudent risk management strategy will aid in cost optimization and, over time, improved margins for the acquired business.
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