Private sector lender HDFC Bank Ltd. is set to buy 3.56 crore shares or 4.99% stake in HDFC ERGO General Insurance Co. from its parent and mortgage lender Housing Development Finance Corporation Ltd.
According to a stock exchange filing on Saturday, HDFC’s board has approved the sale of these shares at a price of Rs 536 per share determined through an independent valuation process. The aggregate consideration for the sale is Rs 1,906.43 crore.
As on March 31, HDFC ERGO’s total turnover or gross written premium was Rs 12,443.93 crore and its net-worth was Rs 2,926.86 crore.
HDFC ERGO is a general insurance joint venture between the mortgage lender and Germany’s ERGO Group. HDFC owns 50.56% stake in the company, with ERGO Group owning 48.46%, as on March 31, according to disclosures on the insurance company’s website. HDFC Ergo is in the business of motor, health, travel, home, personal accident and cyber insurance primarily.
“The proposed transaction will help align the interest of HDFC Bank and HDFC ERGO, which is thereby expected to further accelerate the profitable growth of HDFC ERGO leading to additional long-term value creation for all its shareholders,” HDFC said in its filing with.
Since the bank is a related party, HDFC would conduct this transaction on an arm’s length basis after shareholder approvals, it said in the notification. The transaction would also require approvals from the Insurance Regulatory & Development Authority of India as well as the Reserve Bank of India.
The mortgage lender expects the transaction to be completed by Sep 30.