IRDAI Red-Flags Merger of HDFC Life & Max Life

Insurance Regulatory and Development Authority of India (Irdai) has raised objections to the merger between HDFC Standard Life and Max Life Insurance. The process of the merger and the terms will need to be reworked. Senior officials in the insurance regulator, said on condition of anonymity, a formal communication regarding the same to both the parties would be sent out in a day or a two.

“What we would like to see is a merger between two life insurance companies. What was earlier proposed was not amounting to this,” the executive observed. “We had some reservations and had conveyed these to the companies but now we will send them formal communication that merger cannot go-through in current form,” said a senior member from Irdai.

In August last year, the boards of HDFC Standard Life Insurance Company, Max Life Insurance Company, Max Financial Services and Max India had approved entering into definitive agreements for amalgamation of business between the entities through a composite Scheme of Arrangement.

As a part of the proposed transaction, the life insurance business or Max Life would merge into Max Financial. Shareholders of Max Life would get 1 share of Max Financial for every 4.98 shares they hold in the insurer. Next, the insurance unit would be separated from the merged entity and folded into HDFC Life; shareholders of Max Financial Services (post the amalgamation with Max Life), will get 2.33 share of HDFC Life for each share of Max Financial Services.