Irda Seeks Le­gal Opin­ion on Max-HDFC Merger

In­sur­ance reg­u­la­tor had re­jected the al­liance as it doesn’t al­low in­sur­ance firm and fi­nan­cial ser­vices co to con­sol­i­date

The Economic Times - - Finance & Commodities - Shilpy.Sinha@ times­group.com

Mum­bai: The in­sur­ance reg­u­la­tor has sought the opin­ion of the gov­ern­ment’s top law of­fi­cer, at­tor­ney gen­eral Mukul Ro­hatgi, on the le­gal side of the Max LifeHDFC Life merger plan.

The In­sur­ance Reg­u­la­tory and De­vel­op­ment Au­thor­ity (Irda) had ini­tially re­jected the two-way merger in the way the com­pa­nies had pro­posed. As per the pro­posal, Max Fi­nan­cial Ser­vices was to be merged with Max Life, fol­lowed by a de­merger of the life in­sur­ance busi­ness, which would then be merged with HDFC Life In­sur­ance, cre­at­ing the most valu­able pri­vate sec­tor life in­sur­ance com-

pany at around .₹ 70,000 crore based on the agreed com­mer­cials and share-swap ar­range­ments. Shares of HDFC Life would be listed on the stock ex­changes post the mer- ger. “We have sought le­gal opin­ion on the merger,” said an Irda of­fi­cial. “We have writ­ten to the De­part­ment of Fi­nan­cial Ser­vices, which will take the at­tor­ney gen­eral’s vi- ews through the law min­istry.”

Sec­tion 35 of the Irda Act does not al­low merger be­tween an in­sur­ance com­pany and a fi­nan­cial ser­vices com­pany. There is also no pro­vi­sion un­der the In­sur­ance Act to merge a fi­nan­cial ser­vices com­pany with an in­sur­ance com­pany.

Irda and the fi­nance min­istry didn’t com­ment. In Novem­ber 2016, the two com­pa­nies in­formed ex­changes about reser­va­tions raised by Irda to ac­cept the amal­ga­ma­tion in the form they had pro­posed. HDFC Life and Max Fi­nan­cial Ser­vices had an­nounced the merger in Au­gust to cre­ate the coun­try’s largest life in­sur­ance com­pany with as­sets un­der man­age­ment of over .₹ 1.10 lakh crore. In the merged en­tity, the HDFC group was to own a 42.5% stake, Stan­dard Life 24% and the Max Group 6.6%. Other big share­hold­ers in­cluded Mit­sui Su­mit­omo with a 7.8% stake and Axis Bank with1.2%. “What we can al­low is a merger be­tween Max Life and HDFC Life,” said an Irda of­fi­cial. “They will have to re­work the plan, tak­ing Max Fi­nan­cial Ser­vices out from the deal.” As per the agreed val­u­a­tion and ex­change ra­tio, the rel­a­tive val­u­a­tion of HDFC Life and Max Life was de­cided to be 69% and 31%, re­spec­tively. Share­hold­ers of Max Life were to get one share of Max Fi­nan­cial Ser­vices for ev­ery 4.98 shares held in Max Life. Share­hold­ers of Max Fi­nan­cial Ser­vices were to get 2.33 shares of HDFC Life for each share held.

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