HDFC, Max Group in Talks to Combine Life Insurance Units

  • Deal may pave way for consolidation in $50 billion industry
  • Max Financial, HDFC shares climb on potential merger

Housing Development Finance Corp., India’s largest mortgage lender, and Max Group are in talks to merge their life insurance units.

Max Financial Services Ltd. agreed to start exclusive talks on a possible merger with Max Life Insurance Co. and HDFC Standard Life Insurance Co., the company said in a statement Friday. Max Financial, with a market value of about $2 billion, rose as much as 20 percent in Friday trading, the most since Max Group restructured into three companies in January. HDFC gained as much as 2 percent.

A successful deal could encourage more mergers and investments in the country’s life insurance industry, which KPMG estimated is worth about $50 billion. India’s parliament last year voted to increase the amount foreign investors can own in the nation’s insurers to 49 percent from 26 percent, allowing overseas companies to expand their presence in the world’s second-most populous country.

India’s insurers could attract as much as $5 billion of fresh capital from investors, Mumbai-based Shashwat Sharma, partner for financial services at KPMG, estimated in April. The country has 23 non-state life insurers, according to the Insurance Regulatory and Development Authority of India.

HDFC last year sold a 0.95 percent stake in the insurance unit to PremjiInvest, a fund set up by Indian outsourcing billionaire Azim Premji, in a deal that valued the insurer at about 209.5 billion rupees ($3.1 billion), data compiled by Bloomberg show. Edinburgh-based Standard Life Plc boosted its stake in the Indian venture to 35 percent, from 26 percent, in a deal completed in April. Max Life is a joint venture with Mitsui Sumitomo Insurance Co. 

HDFC Standard Life last month appointed bankers to raise as much as $400 million from an initial public offering, people with knowledge of the matter said earlier.

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