* Companies enter into exclusive merger talks for 60 days
* HDFC Life puts IPO plan on hold, deal to give automaticlisting (Recasts with executive comments, details)
By Devidutta Tripathy
MUMBAI, June 17 (Reuters) - India's HDFC Standard LifeInsurance Co Ltd has begun talks to acquire smaller rival MaxLife Insurance Co Ltd in an all-stock deal to create thenation's top private-sector life insurer, kicking offconsolidation in the $50 billion sector.
The companies approved entering into a "confidentiality,exclusivity and standstill agreement" to evaluate a potentialcombination through a merger of Max Life and its parent MaxFinancial Services into HDFC Life by way of a schemeof arrangement, according to a joint statement on Friday.
The talks could continue for about 60 days, HDFC LifeChairman Deepak Parekh told a news conference, adding the mergerprocess could take a year to complete.
As part of the deal, Max Life will be merged into parent MaxFinancial Services, which in turn will merge with HDFC Life,making it a publicly traded company.
Britain's Standard Life Plc owns a stake in HDFCLife, whose biggest shareholder is Indian mortgage lenderHousing Development Finance Corp.
Japan's Mitsui Sumitomo Insurance Co. Ltd is Max FinancialServices Ltd's joint-venture partner in Max Life, in whichIndia's third-biggest private sector lender Axis Bank also owns a small stake.
HDFC Life, which was planning an initial public offering ofshares and had appointed merchant bankers, is keeping the IPOplan on hold, as the deal, if successful, will give it anautomatic listing, executives said.
Insurers see plenty of room for growth in the world'ssecond-most populous nation of 1.3 billion, where relativelyfewer people hold insurance policies.
However, strong competition and high capital requirementshave seen the top players gaining market share and the smallercompanies struggling.
In a market dominated by state-run Life Insurance Corp, thetop four of the 23 private sector insurers account for 65percent of the private sector insurance market, Parekh said.
HDFC Life is currently the third-biggest private sector lifeinsurer in India, while Max Life is fourth-biggest. The combinedentity will have 1 trillion Indian rupees ($15 billion) ofassets under management.
HDFC Life will benefit from Max Life's wider distributionnetwork, Parekh said, adding they saw a lot of synergies betweenthe companies.
Earlier this month, HDFC Ergo - a general insurance jointventure between HDFC and Munich Re - agreed to buy smaller rivalL&T General Insurance for 5.51 billion rupees. ($1 = 67.0533 Indian rupees) (Reporting by Devidutta Tripathy and Promit Mukherjee; editingby Adrian Croft)
