Mortgage lender HDFC on June 19 announced that it will buy Apollo Hospitals Group's 50.8 percent share in Apollo Munich Health Insurance for Rs 1,336 crore. Subsequently, the standalone health insurer will be merged with HDFC ERGO General Insurance.
HDFC will also buy 0.4 percent stake held by a few employees for Rs 10.84 crore.
In a statement to the exchanges, HDFC said that the merger with its general insurance arm will create a strong health insurance franchise with
combined gross direct premium of Rs 10,807 crore.
The foreign joint venture partner Munich Health Germany will pay Rs 294 crore to Apollo Hospitals Enterprise and Apollo Energy to support the transaction.
"The merged insurance entity on a pro-forma basis has a
combined market share of 6.4 percent of non-life insurance industry, with 308 branches across the country. This also makes the combined entity the second largest private insurer in the accident & health segment with a market share of 8.2 percent," said HDFC in a release.
The proposed share acquisition will be subject to regulatory approvals by National Housing Bank (NHB), Insurance Regulatory and Development Authority of India (IRDAI) and Competition Commission of India (CCI). The subsequent merger of Apollo Munich with HDFC ERGO would be subject to approval of the shareholders, National Company Law Tribunal (NCLT), and final approval of IRDAI.
"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. The combined expertise of HDFC ERGO and Apollo Munich will result in greater product innovation, wider distribution and enhanced servicing capabilities, benefiting their 1.2 crore policy holders," said Deepak Parekh, Chairman of HDFC Ltd and HDFC ERGO General Insurance.
"Creating financing for illness is critical to building a healthy nation, Apollo Munich played a strategic role in building this Industry. We are glad to pass on the baton of Apollo Munich to a reputed group like HDFC. Apollo Munich established its leadership in the industry by winning several awards with its market leading innovations and customer-centric approach. We are sure that the new shareholder will continue to nurture and scale the business to greater heights. The funds from the divestment will enable us to focus on investing and growing our core healthcare business," said Shobana Kamineni, Chairperson Apollo Munich Health Insurance and Vice Chairperson Apollo Hospitals Enterprise Limited.
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