The Hindu Business Line : HDFC to sell 7.15% in life venture to foreign partner

Mumbai, Dec. 31 Housing finance company HDFC said on Monday that it has agreed to sell 7.15 per cent stake in its life insurance joint venture - HDFC Standard Life Insurance Company - to its foreign partner, Standard Life (Mauritius Holdings), at a pre-agreed price.

A source close to the deal, however, said Standard Life paid about Rs 201 crore to HDFC for the 7.15 per cent stake.

With this, Standard Life’s holding in the insurance company will go up to 26 per cent, the maximum foreign equity allowed in insurance ventures.

Standard Life could not hold 26 per cent in the insurance company earlier as it held 9.2 per cent stake in the parent HDFC.

As per insurance regulations, a foreign partner can hold only up to 26 per cent stake indirectly or directly in an Indian insurance company.

To enable it to increase its stake in the insurance business, Standard Life had sold its stake in HDFC to Citi Group for Rs 3,100 crore last year. After the current sale, HDFC’s stake will come down from 81.15 per cent to 74 per cent.

In a notice to stock exchanges, HDFC said it has agreed to sell 8,03,87,686 equity shares of Rs 10/- each of HDFC Standard Life Insurance Company Ltd to Standard Life (Mauritius Holdings) Ltd representing 7.15% of the total issued and paid-up equity.

HDFC and Standard Life have also agreed that any future sale of shares by HDFC to Standard Life (Mauritius Holdings) 2006 Ltd, if and when permitted by law would be at a fair value, the notice added.

Standard Life, one of the leading private life insurance companies, has a market share (new business) of 9.2 percent in the private sector with a total premium income of Rs 2,856 crore in 2006-07.

HDFC said as per the plan, HDFC Standard Life Insurance Company will go in for an initial public offer before the end of 2009.

HDFC Standard Life Insurance has over 12,000 employees and more than 1,00,000 financial consultants covering over 700 cities in India, the company said in a release.

HDFC shares closed lower, at Rs 2872.45 on BSE on Monday as against the previous close of Rs 2923.90.