Stocks in News – HDFC Life Insurance shares down 3.3%, Exide Industries shares up 5.8% after Rs 6,687 cr deal announcement – KNOW OUTLOOK – ZEE BUSINESS VIEW

Stocks in News – HDFC Life Shares - of HDFC Life Insurance Company ended at Rs 734 on the NSE on Friday, down by almost 3.3 per cent. The company on Friday announced acquisition of 100 per cent  stake in Exide Life Insurance from Exide Industries. The deal will be done in two parts - via issuance of 8,70,22,222 shares at an issue price of Rs 685 per share and a cash pay out of Rs 726 crore, aggregating to Rs 6,687 crore.

The proposed transaction will accelerate the growth of agency business of HDFC Life as well as strengthen other distribution channels including Broker, Direct and Co-operative Banks, the company has said in its exchange filing.

Another stock that was in action was Exide Industries Limited shares, as it ended 5.7 per cent up on the NSE on Friday. It settled at Rs 188.

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The share of Exide Life in HDFC Life post acquisition will be 4.1 per cent and the transaction is expected to complete in the next 6 months.

Highlights of Deal –

1. Complementary geographical presence with a strong foothold in South India, especially in Tier 2 and Tier 3 locations
2. Customers to benefit from stronger product suite, wider distribution network and more service touch points
3. Synergies to enhance shareholder value with potential to improve new business margins via operating leverage and product mix optimisation

The embedded value of Exide Life, as on 30 June 2021 was Rs. 2,711 cr as per HDFC Life’s filing to exchanges.

Stocks in News – HDFC Life Insurance shares outlook – The product mix of HDFC Life will enhance significantly and Exide Life’s presence in tier-2 and 3 cities likely to help the former. In the protection segment, Exide Life accounts for 11 per cent market share which will now go to HDFC Life’s fold.

The embedded value of HDFC Life is estimated to go up by at least 10 per cent.

Though the deal has been clinched at a slightly higher price, the valuations of the shares are still at a discount in comparison to its peers.

Stocks to Buy – HDFC Life shares – Nilesh Jain Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking has recently recommended this stock for high gains. It has already achieved its target price of Rs 740, Jain gave on 26 August when the stock was trading around Rs 699.

The 52-week high for this stock is Rs 775.65 which it attained on 2 September 2021. The 52-week low is at Rs 555.95 which it hit on 30 September 2020.