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 mentioned in a statement on Friday morning. Investors weren’t pleased: HDFC Life Insurance Company’s stock fell more than 3% in the course of the opening hour of trade to hit a low of Rs 728.55 per share. HDFC Life is the most significant listed private insurance coverage firm in terms of market place capitalisation.
HDFC Life mentioned that the acquisition will accelerate the development of its agency enterprise. “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 mentioned that the embedded worth of Exide Life, as on June 30, 2021, is Rs 2,711 crore, as reviewed by its advisory firm.
Stock speak
HDFC Life share cost was trading at a low of Rs 728.55 per share on Friday morning, tanking more than 3% in the course of 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 investigation firm ICICI Direct gave a ‘Buy’ contact on HDFC Life with a 3-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 mentioned. The brokerage firm has a target cost of Rs 778 on the stock.
JM Financial also had a ‘Buy’ rating on HDFC Life Insurance. Analysts at JM Financial had mentioned that they think robust development and improvement in post-overrun margins will complement improved-operating metrics top to healthful operating ROEV of ~19% for HDFC Life. They worth HDFC Life at 4.4x FY23E EV, implying a target cost of Rs 800 apiece.
The approach for the merger of Exide Life into HDFC Life Insurance will be initiated on completion of the acquisition. The whole approach, like the acquisition and subsequent merger, is topic to acquiring the relevant regulatory and other approvals.
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