The Board of Directors of HDFC Ergo General Insurance Company Limited has approved the purchase of 100 percent stake in L&T General Insurance Company Limited, subject to IRDAI and other regulatory approvals.
A press release from the company said the Board, at its meeting held here yesterday, also approved the plan to merge the two companies, subject to all regulatory approvals.
Mr. Deepak Parekh, Chairman of HDFC Ltd and HDFC Ergo General Insurance said, “Considering the importance of scale in the insurance business, consolidation within the insurance industry is inevitable. This transaction marks the beginning of this consolidation phase. The acquisition will help HDFC ERGO to further strengthen its presence in the market. The combined size and expertise will result in improved cost efficiencies in the merged entity and benefit policy holders and other stakeholders.”
For the all-cash deal structured by Arpwood Capital Pvt Ltd., exclusive financial advisers to HDFC Ergo, the transaction has been valued at Rs. 551 crore.
“The acquisition would help HDFC Ergo improve its market position. HDFC Ergo expects significant cost synergies arising out of business, technology optimization and rationalization of offices,” the release said.
HDFC Ergo, a 51:49 joint venture between housing finance major HDFC Limited and Ergo International, Germany (part of Munich Re Group), is the fourth largest private sector general insurer in India and offers all lines of general insurance products including motor, health, personal accident, home, fire, marine, aviation, liability and crop insurance. During the financial year ended March 31, 2016, the company wrote gross premiums of Rs. 3467 crore and made a profit after tax of Rs. 151 crore. The company operates through 108 offices and employee strength of 2007.
L&T General Insurance is a wholly owned subsidiary of engineering conglomerate, Larsen and Toubro Ltd. The six-year-old insurer is a relatively new entrant in the insurance industry. During the financial year ended March 31, 2016, L&T General Insurance wrote gross premium of Rs. 483 crore registering a growth of 40% over previous financial year. The company operates through 28 offices and employee strength over 800 employees.
HDFC ERGO to buy L&T General Insurance for Rs. 551 cr
