The insurance regulator has approved "in principal" housing finance major Housing Development Finance Corporation Ltd's (HDFC) sale of a 26-per cent stake (32,500,000 equity shares of Rs10 each) in HDFC General Insurance Company Ltd (HGICL) to ERGO International AG, part of the Munich Re Group.
HDFC Ltd will receive Rs235 crore from ERGO for its 26 per cent stake in the HDFC General Insurance Company Ltd. The transaction is likely to be completed this month.
Deepak Parekh, chairman, HDFC Ltd, said, "General Insurance has been one area where we have lagged behind. There are huge opportunities as the Indian economy is growing over 9 per cent. We need to gear up and focus our energies to become one of the prominent players of this fast growing industry. ERGO is a leading player in Europe, and I am certain that their vast experience, technical expertise and operational know-how will make a big difference for this business."
The shareholder's agreement between the HDFC and ERGO was signed on 30 October 2007 between Parekh and Dr. Nikolaus von Bomhard, CEO, Munich Re Group, ERGO's parent company. HDFC General Insurance Company Ltd Company will be renamed HDFC ERGO General Insurance Company Ltd and will be headquartered in Mumbai.
In a statement the housing finance company said, "The new partnership will enable HDFC Ltd. to successfully grow its existing general insurance operations by further leveraging their outstanding brand equity and distribution strengths. For ERGO, entering the joint venture with HDFC Ltd. underlines the Group's international expansion strategy and offers a direct entry into the Indian general insurance market.