HDFC Bank on Saturday said its board has given its approval to shop for quite 3.55 crore shares in group firm HDFC ERGO General Insurance firm for over Rs 1,906 crore from the parent company development Finance Corporation (HDFC).
“The board of directors of HDFC Bank at its meeting persisted June 18, 2021 has approved the acquisition of 3,55,67,724 equity shares of Rs 10 each, representing 4.99 per cent of the outstanding issued and paid-up capital of HDFC ERGO General insurance firm Ltd from HDFC Ltd,” HDFC Bank said within the filing.
“The aggregate consideration for purchase of 3,55,67,724 shares of HDFC ERGO is Rs 1,906.43 crore, i.e. Rs 536 per share.”
HDFC ERGO General Insurance had a gross written premium of Rs 12,444 crore for the year ended March 2021. The company’s net worth is now at Rs 2,927 crore.
The statement of the bank mentioned that, the private sector general insurer is one among the fastest growing companies among the peers with its gross written premium growing at a 35 per cent compounded annual rate of growth over the last 13 years.
The statement further added that, “the proposed transaction enables the bank to participate within the growth opportunity of HDFC ERGO and augment HDFC ERGO’s growth prospects resulting in long-term value creation by HDFC ERGO to its shareholders.”
The bank has been in a distribution partner of the insurer from 2009.
The transaction, indicative to be closed by September this year, would require approval from insurance sector regulator IRDAI and banking regulator RBI. the other necessary regulatory or government approval are going to be evaluated before the share purchase contract, HDFC Bank said.
