Max Life-HDFC Life deal called off

The proposed merger of Max India and Max Life Insurance with HDFC Standard Life Insurance Co Ltd now stands cancelled as the Analjit Singh-promoted financial services company has decided not to renew the exclusivity agreement that ended today.

The board of HDFC Standard Life, a joint venture between mortgage lender HDFC Ltd and UK-based Standard Life Plc, will now go ahead with initial public offer after the merger proposal with Max Financial Services failed to get regulatory approval.

The Insurance Regulatory and Development Authority of India (Irdai) had expressed reservations on the proposed merger of the life insurance businesses of Max Financial Services Ltd and mortgage lender HDFC.

The merger would have created India's largest private-sector life insurer, with annual premium worth Rs25,500 core, surpassing ICICI Prudential Life Insurance Co Ltd.

HDFC Life will go ahead with its listing plans, while Max Life will continue on its path to invest in organic and inorganic growth. It is understood that HDFC Life will now go ahead with its listing plans first and divest up to 20 per cent stake through the IPO.

The merger plan of the insurance companies was announced in June last year wherein Max Life was first supposed to merge with the publicly-held Max Financial Services Ltd, which in turn would have merged with HDFC Life, offering it an automatic listing route. It was supposed to be a three-way merger.

However, Irdai turned down the proposed deal citing Section 35 of the Insurance Act, 1938, wherein an insurance firm is not allowed to merge with a non-insurance firm. Max Financial, in this case, is not technically considered a life insurance firm.

Max Financial Services was created in 2016, as a result of a demerger of the erstwhile Max India, to provide investors specific and undiluted access to the Group's life insurance business, provide sharper focus to Max Life, and unlock shareholder value.

After Irdai raised objections, both the companies had said they would file a revised merger structure with the insurance regulator.

HDFC Life board is reported to have considered a revised proposal at its board meeting on Monday, which, according to Mint, involved creating a separate insurance entity, tentatively named as HDFC Plus, which would have to secure a fresh licence from IRDA.

For the present, HDFC Life is going ahead with its public listing and has hired merchant banks Morgan Stanley and Credit Suisse to arrange the listing at the earliest.