Deepak Parekh, the chairman of the largest mortgage lender HDFC, said on Wednesday the proposed merger of HDFC Life Insurance
and Max Life has been called off and the company is now focused on taking its life insurance
arm public through the initial public offering
Parekh said the IPO is likely to come in by late November or in the first week of December. HDFC Life and Max Life had proposed a merger last August where Max Life was to be merged first with Max Financial Services, its holding company.
Parekh said under section 35 of the Insurance
Act an insurance
company can only be merged with another insurer. “The regulator Irdai has referred the matter the government and the Solicitor General
took a view that Max Life will lose its insurance
status when if merged with Max Financial Services and therefore it goes against section 35 of Insurance
Act. So, our proposal was rejected,” Parekh told shareholders at the 40th annual general meeting of HDFC. After spending one year in the process, insurance
boards of HDFC Life and Standard Life decided to move forward with the IPO, he said.
Parekh said HDFC Life has already filed papers for an IPO with the Irdai. “We cannot have two things simultaneously. So, when we filed the prospectus we have to take a decision that merger is off and we will go for an IPO.” He said HDFC Life has to file an actuarial report and get a permission from Irdai to file for IPO with Sebi. The company expects to get the approval sometime mid-August and then it will file draft hearing prospects with Sebi.
“We hope that we can open the issue by end-November or in the first week of December, provided we get approval from Sebi,” Parekh added.
He, however, said the HDFC Life is open for merger with Max Life provided Max is willing to combine the two companies and demerge the finance
business of Max Finance
and give the shareholders of Max Finance
“So, there are number of different structures one can look at. We are keen on the merger but at the moment we cannot do it so we are going for an IPO,” Parekh said, adding the general insurance
arm HDFC Ergo he said company is still small and it is not ready for an IPO.
"We have to wait for two three years before we get some value," he said.