HDFC Life Insurance Co. said its acquisition of Exide Life Insurance Co. ticks all boxes, from valuations to business synergies.
The acquisition at 2.5 times the embedded value is still 30-35% cheaper than what other listed life insurers are trading at, including HDFC Life, Vibha Padalkar, managing director and chief executive officer at the acquiring company, told BloombergQuint’s Niraj Shah in an interview.
HDFC Life will fully acquire Exide Life for Rs 6,687 crore. That includes Rs 726 crore cash and the rest by issuing its 8.7 crore equity shares at Rs 685 apiece to Exide Industries Ltd., the parent of Exide Life.
Exide Life’s niche distribution is expected to add 40% to HDFC Life’s existing agency network, according to Padalkar. While HDFC Life will continue to grow, it would have taken two-three years to expand agency network by this scale organically, she said.
Exide Life also has credible broker and corporate agency relationships and its product mix is ideal for the size of its business, Padalkar said. The company has a strong back book or policies no longer sold but still earn premium, according to her.
Embedded value is 10% of that of HDFC Life and she expects integration “fairly cohesive”.
While Exide Life’s has faced cost overrun issues, Padalkar said the insurer’s pre-cost overrun margins are similar to HDFC Life’s. They are merely scale of operations issues and the post transaction scale and cost synergies could make it accretive, she said.
HDFC Life plans of further digitise and add products to Exide Life’s existing business, she said.
Watch the full interview here: