HDFC Life shares continue to decline after deal with Exide Life, brokerages divided on stock – check price target here

HDFC Life Insurance shares continued to decline for the second day on trade today on the back of a deal with Exide Life Insurance. The stock on Monday was trading half a per cent weak to Rs 730.65 apiece on the BSE intraday trade, while it has slumped around 4 per cent in the last two sessions.

The stock is down around 6 per cent from its record high level touched on September 2, 2021.

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HDFC Life Insurance on Friday announced the acquisition of 100 per cent of the share capital of Exide Life Insurance Company via issuance of 8,70,22,222 shares at an issue price of Rs 685 per share and a cash payout of Rs 726 crore, which aggregates to Rs 6,687 crore. 

Even the brokerages are divided on stock, as Nomura believes Exide Life’s acquisition is not large and will lead to a dilution of only 4.3 per cent for HDFC Life. It said the merger should lead to EV accretion of 10 per cent for HDFC Life, while maintaining a Neutral stance on the counter.

The brokerage believes Exide Life’s business has been subpar in the last few years and the company will also add 34 per cent to the agency strength, and it sets a target of Rs 750 apiece.

JPMorgan sees HDFC Life gaining over 3 per cent EV/share with a well-capitalized balance sheet at a 222 per cent solvency ratio. It maintains an Overweight stance and sets a target of Rs 770 per share.

The brokerage says the management track record lends confidence on long-term compounding and points out that Exide Life acquisition is not immediate stock price accretive.

Expanded agency base and entry to new markets will aid FY23-24 growth for HDFC Life, Credit Suisse says while maintaining a Neutral stance, however, reduce the price target to Rs 670 per share.

Deal with Exide is accretive but CLSA says it has a mixed view on rationale, while maintaining an Outperform rating on HDFC Life and sets a target of Rs 790 per share. The brokerage believes a deal is not a game changer as distribution benefits are limited.