Standard Life to raise stake in HDFC Life

The UK-based life insurance company Standard Life will increase its stake in HDFC Standard Life Insurance Company to 26 per cent from the current 14 per cent.

The insurance company is a joint venture between Housing Development Finance Corporation (HDFC) and a group company of Standard Life, UK. HDFC holds 84.2 per cent of the equity in the joint venture.

"Standard Life will increase its stake in the life venture to 26 per cent in a month's time by the return-on-equity formula. The life insurance business is expected to break even in two to three years. For the general insurance business, we are in talks with four or five international players. The partner will be finalised in a month or so. The partner for the general insurance business will come in at a premium as HDFC is a established brand and has a set business and distribution network in the country,'' said Deepak Parekh, chairman, HDFC.

Recently, HDFC bought out 26 per cent stake of Chubb Corporation in HDFC Chubb General Insurance Company.

Following this, HDFC has been scouting for a joint venture partner for its general insurance business.

When asked if HDFC was considering listing of the life insurance venture, Parekh said, "We don't see any need to list the company, as the preferential issue made to Carlyle Group and Citigroup will bring in enough capital. We plan to invest around Rs 500 crore of the proceeds from the preferential offer in the insurance venture and the balance of around Rs 1,300 crore be invested in the HDFC Bank. As far as HDFC is concerned, we could consider a domestic issue if our capital requirement is huge. As of now, the preferential issue should adequately capitalise HDFC. The institution has made a profit of around Rs 381 crore through the stake sale in Intelenet."

Parekh also added that he could consider a stock split at a later date. Currently, the stock price of HDFC stands at Rs 1,900.