HDFC Life merger plan, citing delay
NEW DELHI: HDFC Standard Life Insurance Co Ltd and Max Life Insurance Co Ltd have called off their proposed merger after failing to win regulatory approval for a union that would have created an insurance giant with ₹1.1 lakh crore in assets. In a statement on Monday, Max Financial Services Ltd, Max India Ltd and Max Life confirmed that the proposed merger with HDFC Life has been called off.
The exclusivity agreement with HDFC Life was valid until July 31, 2017 (Monday), and will not be renewed, Max said.
In November, the Insurance Regulatory and Development Authority of India (Irda) referred the deal to the law ministry after raising concerns about its structure being in violation of a section of the Insurance Act.
Max Financial Services was created in 2016, after a demerger of the erstwhile Max India. Both firms had initially proposed the merger of Max Life with Max Financial Services.
This structure was found to be in violation of Section 35 of the Insurance Act, which does not allow merger of an insurance firm with a non-insurance firm.
The law ministry, in turn, sought an opinion from then attorney general Mukul Rohatgi. As per the original scheme, the deadline for Irda approval was to expire in June, while that for court approval was to end in February 2018. When Rohatgi declined to give his view on the matter, Irda in its final decision refused to give the go-ahead to the transaction.
“The prospective partners had evaluated several alternative structures over the last month. However, the inordinate time associated with finalisation and approval of these structures led to this decision,” the statement said.
Mint reported in June that both companies had begun working on an alternative structure while HDFC Life had also simultaneously begun working on its proposed initial public offering.