Exide Industries soars 14% on divestment of life insurance biz to HDFC Life

Shares of Exide Industries hit a high of Rs 202.95, up 14 per cent in early morning trades, on the divestment of the company's entire stake in Exide Life Insurance Company, by way of sale to HDFC Life Insurance Company for a total consideration of Rs 6,687 crore. Exide Life Insurance Company is a material wholly owned subsidiary of the Exide Industries. 

On the other hand, HDFC Life was down 4 per cent at Rs 728.55 on the BSE on profit booking. The stock had hit a record high of Rs 775.65 on Thursday. In past nine trading days, the stock had rallied 14 per cent till yesterday.

The board of Directors of HDFC Life, Exide Industries and Exide Life, at their respective meetings held today, approved the transaction involving the sale of Exide Life Insurance to HDFC Life. HDFC Life will acquire 100 per cent stake in Exide Life Insurance from Exide Industries via issuance of 87 million 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 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, these companies said in common press release. CHECK THE BSE RELEASE HERE

"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.  The customers to benefit from stronger product suite, wider distribution network and more service touch points. The synergies to enhance shareholder value with potential to improve new business margins via operating leverage and product mix optimization," the company said.

Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10 per cent. The embedded value of Exide Life, as on 30th June 2021, is Rs 2,711 crore and has been reviewed by Willis Towers Watson Actuarial Advisory LLP.

HDFC Life’s scale, market-leading digital and product innovation capabilities and prudent risk management strategy will aid in optimizing cost and over time, achieve higher margins for the acquired business, the company said.