In one of the largest deals in the insurance space in recent times, mortgage lender HDFC is acquiring 50.8 per cent stake in Apollo Munich Health Insurance for Rs 1,336 crore from the Apollo Hospitals Group and 0.4 per cent stake held by a few employees for Rs 10.84 crore. Subsequently, the health insurance company will be merged with HDFC’s general insurance arm HDFC Ergo, thus creating a strong health insurance franchise, with a combined gross direct premium of Rs 10,807 crore.
The proposed merger will make the combined entity the second largest private insurer in the accident and health segment with a market share of 8.2 per cent. It will bring synergies to policy holders and other stake holders with an enhanced product suit, touch points, technology innovation, apart from scale-based synergies.
The merged entity will have a combined market share of 6.4 per cent of non-life insurance industry with 308 branches across India. “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.
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Apollo Munich Health Insurance was a joint venture between Apollo Hospitals, which operates among the largest hospital chains in the country, and Munich Health, the health business segment of German reinsurer Munich Re. Munich Health will pay Rs 294 crore to Apollo Hospitals and Apollo Energy in connection with the termination of the joint venture.
“Creating financing for illness is critical to building a healthy nation, Apollo Munich played a strategic role in building this industry. The funds from the divestment will enable us to focus on investing and growing our core healthcare business,” said Shobana Kamineni, chairperson of Apollo Munich and vice chairperson of Apollo Hospitals Enterprise.
The proposed acquisition of shares by HDFC will be subject to approvals from various regulators, including, National Housing Bank (NHB), Insurance Regulatory and Development Authority of India (IRDAI) and the Competition Commission of India (CCI). The subsequent merger will also require the approval of shareholders, National Company Law Tribunal and then the final one from IRDAI.
If the deal goes through, policy holders as well as channel partners will benefit from a wider bouquet of products, touch points and a digital-led service architecture. The employees would also get more opportunities across geographies and functions, the companies said.
On Wednesday, HDFC shares closed 1.1 per cent higher at Rs 2,178.30, while Apollo Hospitals ended 0.08 per cent lower at Rs 1,352.20.
