After the Insurance Regulatory and Development Authority of India (Irdai) rejected the HDFC Life-Max Life merger on June 7, Standard Life, the UK-based partner of HDFC Life Insurance, has expressed apprehensions as to whether any new structure for the proposed merger would be viable or not.
Standard Life, which holds 35 per cent stake in HDFC Life Insurance, said it will be pushing for listing their joint venture with HDFC via an initial public offer (IPO) at the earliest. “There can be no certainty that any options relating to the merger will be viable in which case Standard Life intends to propose an IPO of HDFC Life at the earliest possible opportunity, subject to appropriate market conditions,” Standard Life said in a statement. After the merger, the stake of Standard Life was going to fall to 24.1 per cent.
The HDFC Life-Max Life merger was proposed in August 2016. But even 10 months since the initial announcement, the merger has not made any headway. On Wednesday, the Irdai rejected the structure for the second time as it was violating Section 35 of the Insurance Act of 1938. Section 35 of the Insurance Act says that no life insurance business of an insurer can be transferred to any person, or transferred to or amalgamated with the life insurance business of any other insurer, except in accordance with a scheme prepared under the section and approved by Irdai.
HDFC Life has been looking to list its company since last April and the initial preparation for the listing had been done. With the Irdai objecting to the present structure and with Standard Life now pushing for an IPO, it seems almost certain that it will go through in the coming months.
However, even after the earlier structure getting rejected, both the companies have stated that they remain committed towards a merger. They are hopeful of finding an alternative structure which would satisfy not only the Irdai but also the Competition Commission of India and the Securities and Exchange Board of India.