HDFC and Apollo Munich Merger ???February 20, 2018
HDFC has initiated discussions for a possible acquisition of Apollo Munich Health Insurance after India’s largest mortgage company raised capital to pursue an inorganic growth strategy, people directly aware of the matter said.
HDFC, one of the contenders for buying Start Health and Allied Insurance, has shifted focus to Apollo, which incidentally has a common joint venture partner with HDFC. Ergo, which is the mortgage giant’s joint venture partner, is part of the Munich Re group. In January 2017, Munich Re had announced transferring the primary health business to Ergo.
Apollo holds 51% in the joint venture with Munich Re holding the remaining 49%. Top HDFC officials have had multiple meetings with members of the Apollo family to discuss a potential a stake purchase, which is still in the preliminary stages.
The deal under discussions is essentially a bilateral one with no other suitor in the fray currently, sources added. If talks fructify, the transaction may be structured as a merger with Apollo retaining a stake in the combine.
Neither HDFC nor HDFC Ergo responded to emailed queries. Apollo Munich CEO Antony Jacob said, “As a company policy, we do not comment on market speculation or regarding shareholder matters. In my individual capacity as CEO of the firm, I would like to say that Apollo’s commitment and continued interest in the business is intrinsic to the growth and market leadership we enjoy in the health insurance industry.”
Promoters of Apollo group, which operates the country’s largest private healthcare chain, have an active interest in the health insurer. While Prathap C Reddy is the chairman, his daughters Suneeta Reddy and Shobana Kamineni are directors. Paid-up capital of Rs 358 crore and reserves of Rs 259 crore. The company has written gross premium of Rs 993 crore for the first nine months of the current fiscal.
The domestic health insurance space is witnessing some M&A activity with the country’s first standalone health insurer Star Health running a sale process, which had attracted interests from a clutch of private equity investors and strategic suitors such as HDFC and ICICI Lombard among others. Last year, another healthcare service provider Manipal purchased the stake of the Indian partner in the health insurance JV TTK Cigna. ICICI Lombard also emerged as the first non-linear insurer to go out LIC with a market capitalization of around Rs 37,000 crore.