Max Life front runner to buy IDBI Federal Life
IDBI FEDERAL LIFE IS SAID TO BE VALUED AT AROUND ₹6,000 CRORE AND ANALJIT SINGHPROMOTED MAX IS LIKELY TO BUY A 51% STAKE IN THE COMPANY
Life Insurance Co. Ltd has emerged as the leading candidate to buy out or purchase a majority stake in IDBI Federal Life Insurance Co. Ltd, said two people directly aware of ongoing talks.
IDBI Federal Life is valued at around ₹6,000 crore, said one of the two people, adding that Max is likely to buy a 51% stake in the company. The person declined to be identified.
In 2017, Analjit Singh-promoted Max Life’s proposed merger with HDFC Standard Life Insurance Co. Ltd collapsed after failing to win regulatory approval for a union that would have created an insurance giant with ₹1.1 lakh crore in assets.
“All options are being looked at,” said the person. “If a foreign insurer comes, it can’t pick up more than 49%, which will mean that the existing foreign partner will have to go and the existing domestic partners will have to dilute part of their stakes. If an Indian insurer comes, it will have the option to pick up the entire stake in the company.”
IDBI Bank Ltd holds a 48% stake in IDBI Federal Life while Federal Bank Ltd and Belgian life insurer Ageas SA/NV hold 26% each. Tata AIA Life Insurance Co. Ltd, Kotak Mahindra Life Insurance Co. Ltd, Aditya Birla Sun Life Insurance Co. Ltd and Exide Life Insurance Co. Ltd have also evinced interest in buying IDBI Federal Life’s insurance assets in India.
An IDBI Federal Life spokesperson said the company does not comment on speculation. Max Life declined to comment. Spokespersons from Tata AIA Life and Aditya Birla Sun Life said they would not comment on speculation in response to emails from Mint. “JPMorgan has been appointed as the banker from IDBI Federal’s side to advise on the potential deal. It is desired to close the deal before March 31 to save on taxes,” said the second of the two people cited earlier.
A JPMorgan spokesperson declined to comment.
A hike in foreign investment limit in insurance firms has triggered a consolidation in the sector since 2015. A number of local life insurers saw their foreign joint venture partners raising stakes and strengthening the insurer’s capital for expanding its network and launching more products. Businesses of bankpromoted life insurers, which predominantly use the bancassurance channel to sell products, are more in demand because of their ability to save on distribution costs.
“If Max Life comes, the biggest benefit will be in terms of distribution costs. Max has a tie-up with Axis Bank and IDBI Federal Life, too, has a banking channel. Max Life doesn’t have a parent bank that works as a bancassurance channel. But Axis Bank, through the platform called ‘Maxis’, is doing very well in terms of selling Max Life products,” said the first person.