Max India calls off Max Life-HDFC Life merger of insurance business

The deal had run into troubles with Irdai rejecting the structure for the merger

Max India has called off the proposed merger between its life insurance subsidiary, Max Life Insurance, and HDFC Life.

The company informed the BSE that the deadline for the merger talks, valid till July 31, 2017, would not be extended any further. Max India did not elaborate on the future course.

The merger between Max Life and HDFC Life had been in the pipeline since August 2016. However, it had run into a problem with the insurance regulator, the Insurance Regulatory and Development Authority of India (Irdai), rejecting the structure for the merger.

The prospective partners had evaluated several alternate structures over the last month. However, the inordinate time associated with finalisation and approval of these structures led to this decision, Max India said.

The initial structure proposed by Max Financial services was rejected by the Insurance Regulatory and Development Authority of India (Irdai). It involved a three step deal, wherein Max Life would have merged with Max Financial Services which in turn would have merged with HDFC Life, making it a listed company automatically. However, this was in violation with Section 35 of the Insurance Act, 1938.

The act says that no life insurance business of an insurer can be transferred to any person or entity, or amalgamated with the life insurance business of any other insurer, except in accordance with a scheme prepared under the section and approved by Irdai.  

Meanwhile, HDFC Life in their board meeting on July 17, 2017, had decided to list its share through an initial public offering (IPO). 

Moreover, last week, Housing Development Finance Corporation, the holding company of HDFC Life had informed the exchanges that they would sell 9.57 per cent of their equity shares through an IPO. The company is expected to file Draft Red Herring Prospectus (DRHP) with the regulator by mid next month and expects to complete the listing process by December 2017.

Max Life Insurance reported a profit after tax of Rs 768 crore, up by 50 per cent year-on-year (y-o-y) growth. The asset under management of the company grew by 24 per cent in FY17 to Rs 44, 370 crore. Moreover, its embedded value (EV) stood at Rs 6,950 crore and consolidated revenue was Rs 12, 971 crore.