HDFC Life Insurance to acquire Exide Life for Rs 6,687 cr; HDFC Life stock tanks 3%, Exide Industries jumps 9%

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Updated: September 03, 2021 12:37 PM

HDFC Life Share Price Today, Exide Industries Share Price: HDFC Life Insurance Company on Friday announced the acquisition of Exide Life Insurance Company for Rs 6,687 crore.

HDFC Life Insurance Share Price, Exide Industries Share Price TodayHDFC Life Insurance Company’s stock fell more than 3% during the opening hour of trade to hit a low of Rs 728.55 per share. (Image: Reuters)

HDFC Life Insurance Share Price Today: HDFC Life Insurance Company on Friday announced the acquisition of Exide Life Insurance Company for Rs 6,687 crore. “HDFC Life will acquire 100% stake in Exide Life Insurance from Exide Industries via issuance of (8.7 crore) shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore aggregating to Rs 6,687 crore,” HDFC Life Insurance said in a statement on Friday morning. Investors weren’t pleased: HDFC Life Insurance Company’s stock fell more than 3% during the opening hour of trade to hit a low of Rs 728.55 per share. HDFC Life is the biggest listed private insurance company in terms of market capitalisation.

HDFC Life said that the acquisition will accelerate the growth of its agency business. “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. Further, a good quality, predominantly traditional and protection focussed business, will augment the existing embedded value of HDFC Life by approximately 10%,” they added. HDFC said that the embedded value of Exide Life, as on June 30, 2021, is Rs 2,711 crore, as reviewed by its advisory firm. JM Financial Limited and Ambit Private Limited provided fairness opinions to the Boards of HDFC Life and Exide Industries respectively.

Stock talk

HDFC Life share price was trading at a low of Rs 728.55 per share on Friday morning, tanking over 3% during the initial hours of trade. Exide Industries on the other hand was up 9%, trading at Rs 194.5 per share.

Previously, domestic brokerage and research firm ICICI Direct gave a ‘Buy’ call on HDFC Life with a three-month time frame on August 25. “The share price of HDFC Life has undergone shallow retracement in the last six months after witnessing strong up move during Oct-20 to Feb-21. Currently, stock regained upward momentum after forming a higher base above 52 weeks EMA as seen during October 2020. Thereby offering fresh entry opportunity to resolve higher and eventually shift in a new orbit,” ICICI Direct had said. The brokerage firm has a target price of Rs 778 on the stock.

JM Financial also had a ‘Buy’ rating on HDFC Life Insurance. Analysts at JM Financial had said that they believe strong growth and improvement in post-overrun margins will complement better-operating metrics leading to healthy operating ROEV of ~19% for HDFC Life. They value HDFC Life at 4.4x FY23E EV, implying a target price of Rs 800 apiece.

The process for the merger of Exide Life into HDFC Life Insurance 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.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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