We expect double digit growth in the merged entity, says Deepak Parekh

Analjit Singh, Max Group promoter and HDFC Chairman Deepak Parekh spoke about the merger of HDFC Ltd with Max Life and Max Financial Services

After the announcement of a proposed merger of Max Life and Max Financial Services with HDFC Life, Analjit Singh, chairman emeritus of Max Group, and Deepak Parekh, chairman of HDFC Ltd, spoke about the deal and its contours at an interaction with the media. Edited excerpts:

What prompted you to evaluate a merger with HDFC Life? 
Analjit Singh: We are the largest non-bank owned life insurance player in India… (and) didn’t want to sit in the same position because there is a threat of de-growing, which is why we decided to trade up and merge with the iconic brand name of HDFC with operations double our size. Post-merger we become the single-largest private life insurer and there’s very little anyone can do to shake that position. Having two operations in two parts of the country is another advantage. Our largest market is Gujarat apart from being the largest in North and HDFC Life is strong in the west. While it’s too early to flesh out what two plus two will be, it better be more than four.

What is the advantage that you see in merging with Max Life? Will there be further consolidation in the sector and are you looking at any other potential acquisitions?

Deepak Parekh: We have two big banks (HDFC Bank and Axis Bank) and apart from them, we also have smaller banks as well. So, we hope that the growth of the combined entity will be much higher. They do not have a bank in their stable, so their distribution network is far stronger than us. We expect double-digit growth in the merged entity.
There will be more consolidation in the industry. The premiums that some players are writing are not sustainable and the losses that some of the companies are making are massive losses. Several of them have foreign partners and at some stage they will look at consolidation. With respect to further acquisitions, I would say that let us digest this first.

How will the merger pan out? How long will it take to be completed?
Deepak Parekh: We get automatically listed without going through the process since Max Financial Services is already listed. We are also in discussions with our respective foreign partners and both have agreed to it and we have to work out the ratios to see how much each shareholder will hold.

We need a number of approvals, including from the insurance regulator, high courts, Competition Commission of India and Securities and Exchange Board of India. We hope that we can get due diligence done in 60 days and the entire process would take 12 months. We will file the application after 60 days to the Insurance Regulatory and Development Authority of India post the due diligence. 

What happens to shareholding of Axis Bank post the merger?
Analjit Singh: We have a fresh agreement with Axis Bank till 2021 and Axis Bank holds five per cent stake in Max Financial Services. If the value of the merged entity is higher than today’s level, they (Axis Bank) will tend to gain. 

When can we expect the IPO of Max India?
Analjit Singh: Max India will be listed in the next couple of weeks, maybe about three-four weeks.