HDFC to Buy Apollo Munich

Housing Development Finance Corp agreed to acquire 51.2% of Apollo Munich Health Insurance, paying ₹1,347 crore in cash for the stake held by the Apollo Hospitals Group and a few employees of the insurer.

The nation’s largest mortgage lender, which runs general and life insurance businesses through subsidiaries, will pay ₹1,336 crore to the Apollo Hospitals Group for its entire 50.8% stake and ₹10.84 crore to the employees for their 0.4% holding.

Germany’s Munich Health Holding, which owns nearly 49% of the health insurer, will continue to hold the investment and become a partner in HDFC Ergo. Munich Health will pay ₹294 crore to Apollo Hospitals Enterprise and Apollo Energy for the termination of their joint venture agreement.

After the completion of the deal, HDFC will merge Apollo Munich with HDFC Ergo General Insurance, making it the third-largest private sector general insurer behind ICICI Lombard and Bajaj Allianz General Insurance. The entity will have combined gross direct premium of ₹10,807 crore, a market share of 6.4% of the non-life insurance industry and 308 branches. In the accident and health segment, it will become the second-largest after Star Health, with a 8.2% market share.

A member of the family running the Apollo Group and a top executive at one of its divisions told ET that the deal has a three-year non-compete condition. “We may collaborate with them to jointly bring out products as the case may be, but won’t compete,” said the family member, speaking on condition of anonymity.

The group will deploy the proceeds into its core business, the person said, adding: “We invested ₹300 crore and got back ₹1,600 crore. The JV had unlocked great value and we exited at a great price.”

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,” HDFC chairman Deepak Parekh said in a statement.

“This transaction will strengthen the HDFC group’s commitment to the growing health insurance segment,” Parekh said.

For the year ended March 31, 2019, Apollo Munich had reported gross written premium of ₹2,194.4 crore. The paid-up share capital of Apollo Munich is ₹358.41 crore.

The company in a statement said the proposed merger was expected to result in significant benefits to policyholders and other stakeholders with an enhanced product suite, touch points, technology innovation, as also via scale-based synergies. India’s largest standalone health insurer, Star Health, was earlier acquired by a clutch of private equity funds. There are over half a dozen standalone health insurers. Growing scale and reducing costs to achieve profitability are the challenge for these health companies.

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