Highlights:

The company has announced acquisition of 100% stake in Exide Life Insurance from Exide Industries via issuance of 8.70 crore shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore, aggregating to Rs 6687 crore.

The focus of the company is on strong growth, while it also focused on inorganic growth.

The company expects the proposed transaction to accelerate the growth of agency business of HDFC Life as well as strengthen other distribution channels including broker, direct and co-operative banks.

The agency channel contributed 60% of the business of Exide Life, brokers 20%, corporate and institutional 7% and direct 10%.

On completion of merger, Exide Life would add 40% to the HDFC life agency business and 35% to agent-base.

Exide Life complements to HDFC Life's geographical footprint with a strong foothold in South India, especially in Tier 2 and Tier 3 locations, thus providing access to a wider market.

More than 60% of the business of Exide Life comes from Tier 2 and 3 locations.

The customers would benefit from stronger product suite, wider distribution network and more service touch points.

The company sees potential to improve new business margins via operating leverage and product mix optimization.

The process for merger of Exide Life into HDFC Life 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.

Further, a good quality, predominantly traditional and protection focused business, will augment the existing embedded value of HDFC Life by approximately 10%. The embedded value of Exide Life is Rs 2711 crore end June 2021.

HDFC Life's scale, market-leading digital and product innovation capabilities and prudent risk management strategy will aid in optimizing cost and over time, achieve higher margins for the acquired business.

The company expects to realize synergy benefits over a period of next 18 to 24 months.

Exide Industries will hold 4.1% stake in HDFC Life Insurance Company post completion of the transaction.

The lock in period for Exide Industries is one-year, while Exide Industries is interested to stay invested.

The market share of HDFC Life is expected to get a boost of more than 1% and AUM would increase by more than 10% to over Rs 2 lakh crore after merger.

Exide Life has been profitable for last 6 to 7 years. Market share is stable at 1.3%.

The customer base of Exide Life is 10 lakh customers.

The operating variance of Exide Life is under control. The company does not expect any material changes to the embedded value assumptions post merger.

A company is watching covid claims of Exide Life similar to the industry and its also well provided.

The company expects the transaction to complete in next 6 months and post that it would take another 12 to 15 months for the normalization.

The company expects Exide Life to become its subsidiary in next 6 month.

13 month persistency of Exide life is 75%.

The cost to revenue is 20% for Exide Life compared with 12% for HDFC Life Insurance Company.

On valuations, the company sees discount of 35% for transaction compared with listed peers.