HDFC buys 0.7% stake in HDFC Life Insurance for Rs 993 cr ahead of merger with HDFC Bank

HDFC on Tuesday bought 1.49 crore shares of HDFC Life Insurance Company Ltd for Rs 992.6 crore through a bulk deal. The housing finance major acquired the shares at an average price of Rs 667.10 apiece. With this deal, HDFC's holding in HDFC Life Insurance has gone up to 49.35 per cent. The housing finance major needs to buy another 1.4 crore shares of HDFC Life to have over 50 per cent ownership in the latter. Shares of HDFC Life Insurance surged nearly 6 per cent to close at 667.70 on the BSE on Tuesday.

The deal comes just days before the merger of HDFC with its banking subsidiary HDFC Bank. HDFC chairman Deepak Parekh on Tuesday said the merger will be effective July 1. "Almost all the approvals are in place, and we hope to complete the merger process effective July 1. The boards of HDFC and the bank are meeting separately on June 30 after office hours to clear and approve the merger, which will be effective July 1," Parekh said in a press conference.

HDFC vice-chairman and chief executive Keki Mistry said after the all-stock merger, the shares of HDFC will cease to be traded from July 13 or 14. "Effective July 13 or 14 or latest by July 17 for sure, HDFC shares will be trading as HDFC Bank shares," Mistry said, adding that he can't tell an exact date for this as this process is up to the exchanges to decide and execute.  

Hours after the press conference, the housing finance firm, in an exchange filing, said these dates are 'tentative' and they are "beyond the control" of HDFC Ltd or HDFC Bank.

In April last year, HDFC Bank agreed to take over its parent in a USD 40-billion all-stock deal, creating a financial services titan with a combined asset of over Rs 18 lakh crore. The combined shares of the HDFC twins will have the highest weighting on the indices at close to 14 per cent, much higher than the present index heavyweight Reliance Industries Limited (RIL).

Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.

(With inputs from PTI)