Mumbai, Jun 20: HDFC will acquire a majority stake in Apollo Munich Health Insurance for Rs 1,347 crore following a deal with the company’s promoter Apollo Hospitals group. Once it is approved by the housing and insurance regulators and the competition commission, HDFC plans to merge the health insurer with its own non-life subsidiary HDFC Ergo.
Announcing the acquisition, HDFC chairman Deepak Parekh said that a direct acquisition of Apollo Munich by HDFC Ergo would result in a breach of foreign holding limits as HDFC’s partner Ergo is part of the Munich Re group, which holds 49% in Apollo Munich and a little over 48% in HDFC Ergo. Insurance laws treat foreign partners’ investments in the parent company as an indirect shareholding.
Apollo Munich Health Insurance chairperson and Apollo Hospital Enterprise vice-chairman Shobana Kamineni said that the proceeds of the sale would be used for de-leveraging by bringing down group debt and building new hospitals. The Apollo group was started by Prathap C Reddy and the health insurance joint venture was promoted by Kamineni. HDFC will acquire 50.8% from the Apollo Hospitals group for Rs 1,336 crore and will buy out the 0.4% stake being held by the employees for Rs 10.8 crore.
German insurer Munich Health will pay Rs 294 crore to Apollo Hospitals Enterprise and Apollo Energy for terminating their joint venture, Parekh said. The merger will increase HDFC Ergo’s market share from 5.1% to 6.4% and will significantly increase its share in the health insurance pie, the non-life insurer’s MD & CEO Ritesh Kumar said.