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Housing Development Finance Corporation (HDFC) on Wednesday announced that it would be acquiring 51.2 per cent stake in Apollo Munich Health Insurance and would be later merging it with its general insurance arm HDFC Ergo. The two-stage transaction, which is subject to regulatory approvals, is priced at about ₹1,347 crore. HDFC will pay about ₹73.2 per share to Apollo Hospitals for the acquisition.
“HDFC Ltd and Apollo Hospitals Group at their respective meetings approved entering into definitive agreements for HDFC to acquire the entire 50.8 per cent shareholding of Apollo Group, in Apollo Munich Health Insurance Company for ₹1,336 crore and 0.4 per cent shareholding held by a few employees for a consideration of ₹10.84 crore,” HDFC said in a release.
Additionally, Munich Heath Germany will pay ₹294 crore to Apollo Hospitals and Apollo Energy for termination of their joint venture.
In the first stage, Apollo Munich would be held as a subsidiary of HDFC Ltd, and in the second stage, it would be merged with HDFC Ergo General Insurance to form one entity under the HDFC Ergo brand.
HDFC Chairman Deepak Parekh said the merger will create a strong health insurance franchise for HDFC Ergo. “It is difficult to put an exact time frame, but within nine months, we are likely to get all approvals,” he told reporters.
He further said an IPO is unlikely for HDFC Ergo in 2019 or 2020. “We will first create scale and plan an IPO later,” he said.
Highlighting the benefits of the acquisition, Parekh pointed to the low financial penetration and non-life insurance penetration in India. “In the general insurance space, it is expected that the share of accident and health insurance will rise from 30 per cent currently to 39 per cent in the next five years and will overtake motor insurance,” he said.
“The funds from the divestment will enable us to focus on investing and growing our core healthcare business,” said Shobhana Kamineni, Chairperson, Apollo Munich Health Insurance and Vice-Chairperson, Apollo Hospitals.
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