ERGO buys 22.9% stake in HDFC ERGO for Rs 1,122 cr

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Mumbai | Published: December 18, 2015 12:12:24 AM

While ERGO’s share will increase to 49%, HDFC’s holding in the general insurance venture will come down from 73.63% to 50.73%

Germany-based ERGO Insurance Group is the latest foreign insurer to increase its stake from 25.84% to 48.74% in HDFC ERGO General Insurance for Rs 1,122 crore. In a filing to the Bombay Stock Exchange, HDFC announced that as part of the agreement, ERGO will acquire 12.33 crore shares at a price of Rs 90.973 apiece, valuing HDFC ERGO General Insurance at Rs 4,900 crore.

While ERGO’s share will increase to 49%, HDFC’s holding in the general insurance venture will come down from 73.63% to 50.73%.

Industry officials stated that with clarity on ‘management control’ issue more and more foreign players have increased their stake in Indian insurance business. “This is a very positive sign and insurance companies can expand their businesses and reach by selling their stake to their foreign partner,”  said a senior official from leading insurance company.

For the financial year ended March 31, 2015, HDFC ERGO had gross written premium of Rs 3,257 crore, while total income was Rs 1,990.66 crore. Profit after tax stood at Rs 104 crore.

The Insurance Laws (Amendment) Act, passed in February 2015, allows foreign partners to increase their stake in Insurance firms from 26% to 49%. Several foreign promoters have increased their stake in insurance joint ventures in the past few months, after regulator Insurance Regulatory and Development Authority of India (Irdai) clarified the issue of ‘management control’.

HDFC ERGO offers general insurance products ranging from motor, health, travel, home, personal accident. Besides, it offers customised services like property, marine and liability insurance in retain space.

Last week, the AIA Group had increased its stake in Tata AIA Life Insurance Company from 26% to 49%. Earlier, Sun Life Financial had raised its stake in Birla Sun Life Insurance (BSLI) from 26% to 49% at an investment 1,664 crore.

Recently, a number of foreign players in the sector have raised stakes in Indian JVs including Nippon in Reliance Life Insurance, AXA in Bharti AXA Life Insurance, Bupa in Max BUPA health insurance.

The increased foreign capital in the Indian insurance space is expected to boost competition among various players and help deepen insurance penetration in the country.

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