HDFC Life Insurance Company has today announced the acquisition of Exide Life Insurance Company on Friday, 3 September. The deal is worth around Rs 6687 crore. According to a statement issued by HDFC Life Insurance, it will buy 100% stake in Exide Life Insurance. For this, it will buy 8.7 crore shares by Exide Industries at a price of Rs 685 per share and HDFC Life will make a cash payment of Rs 726 crore. There was a negative reaction from investors regarding this decision.
Shares of HDFC Life Insurance fell over 3 per cent to a low of Rs 728.55 in early trade today. HDFC Life is the largest listed private insurance company in the country by market cap. However, the shares of Exide Industries rose by 9 percent to reach a price of Rs 194.5. The process of merger of Exide Life with HDFC Life Insurance will begin after the completion of the acquisition. This entire process, which includes acquisitions and mergers, is yet to take regulatory and other approvals.
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Agency business growth expected to accelerate
HDFC Life says that this acquisition will accelerate the growth of its agency business. Exide Life has a strong presence in South India, the acquisition of which will enhance HDFC Life’s presence across multiple sectors. Exide Life has a strong presence in Tier 1 and Tier 2 cities. Apart from this, the better quality, primarily traditional and protection focused business will increase the embedded value of HDFC Life by 10 percent. According to the advisory firm of HDFC Life, its embedded value as on 30 June 2021 was Rs 2711 crore.
Here is the opinion on brokerage firms HDFC Life Insurance
- On August 25, domestic brokerage and research firm ICICI Direct had given a buy rating to HDFC Life in a three-month time frame. According to the brokerage firm, after the rise in October 2020-February 2021, its price declined for the next six months. The stock is once again looking bullish and is forming a higher base above the 52-week EMA (Exponential Moving Average) as seen during October 2020. The brokerage firm has fixed a target price of Rs 778 for this stock.
- JM Financial gave HDFC Life Insurance a buy rating. According to analysts, there is a possibility of strong growth in this. Analysts at JM Financial have valued it at 4.4x FY23E EV (Enterprise Value), ie the target price has been kept at Rs 800.
(Article: Kshitij Bhargava)
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