In a similar move, ICICI Bank this week approved a proposal to increase its shareholding in ICICI Lombard General Insurance, aiming to establish the company as a subsidiary of India's second-biggest lender by market capitalisation.
Shares of HDFC Life climbed 1.10% to Rs 585.45 on the Bombay Stock Exchange on a day the the benchmark Sensex rose 0.20%.
Mumbai: HDFC Bank, the country's most valued lender, is set to acquire a 1.66% stake in HDFC Life from its UK-based joint venture partner. The purchase is aimed at making the insurer a subsidiary of the bank, expanding the list of blue-chip private-sector lenders that want controlling stakes in their insurance businesses.
HDFC Bank will buy the stake from Abrdn (Mauritius Holdings) 2006, formerly known as Standard Life Aberdeen, its original joint venture partner that will now completely exit from the company.
In a similar move, ICICI Bank this week approved a proposal to increase its shareholding in ICICI Lombard General Insurance, aiming to establish the company as a subsidiary of India's second-biggest lender by market capitalisation.
The Reserve Bank of India (RBI) has granted permission for HDFC Bank or mortgage lender HDFC to increase shareholding in HDFC Life and HDFC ERGO to more than 50%. As of March 31, 2023, HDFC holds 48.65% in HDFC Life.
HDFC, India's mortgage-lending pioneer, is merging with HDFC Bank, and the process should conclude by July.
Abrdn has appointed Bofa Securities to facilitate the sale of its 1.66% stake in HDFC Life Insurance Company through a block deal, banking sources said. Bofa Securities has been involved in all deals done by abrdn in the past three years.
Minor Discount to CMP
The offer price range is ₹563.2 - ₹585.15 per share, which translates into a 3.75% discount to ₹585.15 per share closing share price on May 30, 2023. Based on the last closing price, Abrdn could make about ₹1,950 crore by selling its stake in HDFC Life.
A spokesperson at HDFC Bank did not immediately respond to a request for comment while Abrdn officials were not immediately reachable.
HDFC Bank's current distribution of HDFC Life products constitutes 55% of the overall annualized premium equivalent (APE), and it aims to increase this share to 70% in the coming quarters.
By acquiring a 50% stake, HDFC Bank will transition from being a distributor to a promoter.
A Macquarie report states that HDFC Life is confident of achieving a 17-20% growth in APE and value of new business (VNB), while maintaining a return on embedded value (ROEV) of approximately 17-18%.
During the fourth quarter ending March 31, 2023, HDFC Life reported a 28.4% decline in consolidated net profit. However, net premium earned during the period increased 25% to ₹19,469 crore, with first-year premiums expanding 55% to ₹446 crore and single premiums by 30% to ₹590 crore.
Growth in new business premiums is attributed to high-ticket policy sales of non-par policies, following the announcement in the Budget 2023 that such policies would become taxable after April 1, 2023.
Shares of HDFC Life climbed 1.10% to Rs 585.45 on the Bombay Stock Exchange on a day the the benchmark Sensex rose 0.20%.
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