HDFC Ltd said on Wednesday it has agreed to acquire a majority stake in Apollo Munich Health Insurance Co. Ltd and merge it with its general insurance arm.
India's biggest mortgage lender said in a stock-exchange filing that it will pay Rs 1,346.84 crore to acquire a 51.2% stake in Apollo Munich.
It will later merge Apollo Munich with HDFC ERGO General Insurance Company Ltd.
HDFC said it will acquire 50.8% of Apollo Munich for Rs 1,336 crore from Apollo Hospitals Group and 0.4% from a few employees for Rs 10.84 crore.
Apollo Munich is India’s second-largest health insurance provider. Chennai-based Apollo Hospitals owns a 51% stake in the insurer and German reinsurance company Munich Health Holding AG holds the rest.
Munich Health will pay Rs 294 crore to Apollo Hospitals Enterprise Ltd and Apollo Energy Ltd to support the transaction, HDFC said in a statement.
In February, Bloomberg had reported that Apollo Hospitals founder Prathap C Reddy and his family were looking to sell their entire 51% stake in the health insurance arm to pare Rs 3,430 crore debt of the hospital chain.
The deal comes three years after HDFC ERGO acquired L&T General Insurance to become the third-largest private-sector general insurer in the country.
HDFC said the merger of Apollo Munich and HDFC ERGO, which has a 5.1% market share, will create the second-largest health insurer in the private sector with a combined share of 8.2%. The combined gross direct premium of the merged entity will be Rs 10,807 crore.
HDFC holds a 50.49% stake in HDFC ERGO while Munich Re owns the remaining through ERGO International AG, its main insurance entity.
“Health insurance penetration in India is still at a very nascent stage compared to the global average, but is expected to drive growth of the general insurance industry in the times to come. This transaction will strengthen the HDFC group’s commitment to the growing health insurance segment,” said Deepak Parekh, chairman of HDFC.
The proposed acquisition is expected to be completed within four months. The merger with HDFC ERGO will be completed within nine months after approvals from the National Housing Bank, Insurance Regulatory and Development Authority of India, Competition Commission of India and the National Company law Tribunal.