The country’s largest mortgage lender Housing Development Finance Corp. (HDFCNSE 0.63 %) is in advanced talks to acquire Apollo Munich Health Insurance Co. for an approximate valuation of Rs 1,000 crore, said two people aware of the development.
“HDFC is close to acquiring Munich Re’s health insurance venture in India with Apollo,” said one of the people cited above. “Since Ergo has a partnership with HDFC in the general insurance space, it was easier for the two to strike the deal.” HDFC Ergo General Insurance is a joint venture between HDFC and Ergo International AG, part of Germany’s Munich Re group, a leading reinsurer in Europe. HDFC has a 51% stake and Ergo holds 49%.Arpwood Capital is advisor to the deal.
“We are open to organic growth opportunities, whether it is at the HDFC level or at the level of any of our subsidiaries but that depends obviously on the opportunity that is available,” said Keki Mistry, vice chairman of HDFC, which raised Rs 13,000 crore through a qualified institutional placement (QIP) earlier this year.
Apollo Munich is a joint venture between Chennai-based Apollo HospitalsNSE -1.10 % promoted by Prathap C Reddy and his family and Munich Re. It is the second largest standalone health insurance provider in the country, with a 1.08% market share after Star Health. The company’s gross premium income grew 31% to Rs 1,446 crore in the April 2017-February 2018 period. Apollo has a 51% stake in the company while Munich Re has a 49% stake.
“As a company policy we do not comment on market speculations of this nature or regarding shareholding matters,” Apollo Munich said in an email.
The health insurance sector is the fastest-growing segment in the insurance space. Overall health expenditure in India is in excess of $100 billion, according to the World Health Organization, with little of it covered by insurance. India has only six pure health insurance providers, although a few have applied for licences to the regulator. These companies are looking at increasing scale by writing retail, corporate and mass insurance policies.
Many new companies have introduced innovative products and are trying to be distinctive through customer experience, especially with digital channels of sales and service. “The sector needs patient and long-term growth capital to penetrate the population,” said Joydeep Roy, partner, PwC. “Retail insurance in health is highly profitable and therefore the companies that grow fast will also be highly valued and quicker IPOs can be made practical to access long-term capital.”
