HDFC Standard Life Insurance Co. Ltd. and Max Life Insurance Co. Ltd. said they are evaluating various options after they could not secure approval from the Insurance Regulatory and Development Authority of India for their proposed merger.
Under the proposed three-step merger, Max Life Insurance will merge with parent Max Financial Services Ltd. and the combined companies' life insurance business will demerge into HDFC Standard Life. HDFC Standard Life will also acquire the listed status of Max Financial.
The companies' statements came after the regulator on June 7 reaffirmed its original position that the deal's proposed structure violates section 35 of the Insurance Act, 1938, which bars the merger of an insurance company with a noninsurance company. The IRDAI's denial came after India's attorney general in late May refused to give legal opinion on the merger.
HDFC Standard Life is a joint venture between Housing Development Finance Corp. Ltd. and U.K.-based Standard Life Plc. Max Life Insurance is a joint venture between Max Financial Services and Japan's Mitsui Sumitomo Insurance Co. Ltd.
HDFC Standard Life and Max Life did not provide details about the options they are exploring. However, Mint quoted "two people directly aware of the discussions" as saying that the companies have started tweaking the structure of the merger deal.
Standard Life said it intends to propose an IPO of HDFC Life at the earliest possible opportunity if the options do not turn out to be viable. Such a proposal would be subject to appropriate market conditions, the company noted in a filing to the London bourse.
Standard Life's statement is in line with comments recently made by Housing Development Finance CEO Keki Mistry about the IPO option. Mistry said the company plans to pursue an IPO of HDFC Standard Life if the proposed structure of the deal does not go through.