India’s insurance regulator, the Insurance Regulatory and Development Authority of India (IRDA), has denied approval to the proposed merger of Max Life Insurance Co. Ltd and HDFC Standard Life Insurance Co. Ltd (HDFC Life), citing Section 35 of the Insurance Act, 1938, which bars the merger of an insurance company with a non-insurance firm.
Both companies, in separate statements issued Thursday, confirmed the move. They were looking for other options, they said.
“Further to the representations made to IRDA, the IRDA has on 7 June, 2017, reaffirmed its original position regarding Section 35 of the Insurance Act, 1938. HDFC Life and Max Life remain committed to the merger and are evaluating various options,” Max India Ltd informed the exchanges on Thursday.
“HDFC Life and Max Life remain committed to the merger and are evaluating various options,” HDFC Life said in a separate statement.
The decision was left with the IRDa after Attorney General Mukul Rohatgi declined a request from the Law ministry last month seeking legal opinion on the proposed merger of Max Life and HDFC Life.
Reports citing people in the know of developments say that both companies have already begun reworking the structure of the deal. “One option could be to directly merge Max Life with HDFC Life but these are mere options as of now, and no final decision has been taken,” Mint quoted one of the persons in the know as saying.
The proposed merger would have created an insurance behemoth and India’s largest private sector life insurer, second only to state-run Life Insurance Corp. of India (LIC).
HDFC Life and Max Life had announced their merger plans in August last year through a three-step merger process, under which Max Life would first merge with its parent company Max Financial Services, and subsequently the life insurance business would be de-merged from Max Financial and merged into HDFC Life.
The transaction would have led to the automatic listing of HDFC Life through a reverse merger process. HDFC Life would hold a majority stake in the combined entity.
In November, however, IRDA referred the deal to the Union law ministry after raising concerns that the current structure of the deal was in violation of Section 35 of Insurance Act, which does not allow merger of an insurance firm with a non-insurance firm.