InvestorQ : Can you tell me how HDFC Insurance and Exide Insurance gain from this merger deal?
diksha shah made post

Can you tell me how HDFC Insurance and Exide Insurance gain from this merger deal?

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Anamika Sodhani answered.
3 months ago
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For HDFC Life it not only helps tap the vast uninsured market in India but also gets to take on the competition from LIC more effectively with a bigger network. For example, Exide has a strong network and franchise in the South and this deal will give HDFC Life a solid captive market in the fast-growing South region.

Then of course, there is the accretion to top line and customers that this deal will bring in. For example, Exide life has over 12 lakh customers plus an AUM of Rs.18,800 crore, which gets added to HDFC Life Kitty. In addition, the annual premium income of Rs.3,325 crore of Exide Life will also weight to the revenues of HDFC Life.

Let me now turn to the gains for Exide Life first. Clearly, Exide Life gets a much bigger balance sheet now that it is part of the HDFC Life group. Insurance business is capital intensive when it comes to developing and nurturing the sales networks, educating agents, penetrating the untapped markets etc. A bigger name helps in such cases.

For Exide Industries, they get paid Rs.6,687 crore in stock cash which is nearly 4 times the amount they invested in Exide Life, so it is a reasonably good deal. Since only 10% will be paid in cash, it can use the cash for its batteries business but the balance 90% in stock will ensure that Exide continues to be interested in the life insurance sector.

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