HDFC Bank said on Saturday that its board of directors has agreed to buy more than 3.55 crore of shares of HDFC group company ERGO General Insurance Company for more than Rs 1,906 crore from parent company Housing Development Finance Corporation (HDFC). “The board of directors of HDFC Bank, at its meeting held on June 18, 2021, approved the purchase of 3 5 5 67 724 shares of Rs 10 each, representing 4.99% of the issued and paid-up capital in circulation of HDFC ERGO General Insurance Company Ltd. of HDFC Ltd., ”HDFC Bank said in the filing.
HDFC is the promoter and related party of the bank. The purchase is to take place at a price determined on an independent valuation report, subject to receipt of the necessary approvals, including regulatory approvals and the approval of the bank’s shareholders, he said. “The aggregate consideration for the purchase of 3 5 5 67 724 shares of HDFC ERGO is Rs 1,906.43 crore, or Rs 536 per share,” he added.
HDFC ERGO General Insurance had a written gross premium of Rs 12,444 crore for the fiscal year ended March 2021. The net worth of the company stood at Rs 2,927 crore. The private sector general insurer is one of the fastest growing companies among its peers, with its gross written premiums increasing at a compound annual growth rate (CAGR) of 35% over the past 13 years. “The proposed transaction allows the bank to participate in the growth opportunity of HDFC ERGO and increase the growth prospects of HDFC ERGO leading to long-term value creation by HDFC ERGO for its shareholders”, t -he declares.
The bank has been a distribution partner of the insurer since 2009. The transaction, which is expected to close by September this year, will require approval from insurance industry regulator Irdai and banking regulator RBI. Any other necessary regulatory or government approvals will be assessed prior to the share purchase agreement, HDFC Bank said.
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Article first published: Saturday June 19, 2021, 7:44 PM [IST]