Another deal in the health insurance industry is speculated to mature. Arm of Housing Development Finance Corporation (HDFC) general insurance, HDFC ERGO is in talks to acquire Apollo Munich insurance in Rs. 2600 crore. This will be the second deal in the health insurance industry. The recent deal that has taken this year is by a consortium between Rakesh Jhunjhunwala, Madison Capital & West-Bridge AIF. Their venture Safe Corp Holdings has acquired Star Health & Allied Insurance Company in Rs. 6500 crore. This acquisition happened off lately in August this year in 2018. According to Rahul Sakia, an Investment Banker “Health Insurance Industry is one of the most popular and fastest growing insurance sectors but they may not have much scope to play that can affect the overall profitability”. The reason for consecutive consolidation is cited due to multiple players like Life, General Insurance and standalone Health Insurance companies dealing in the same business of Health Insurance.
In the current anticipated deal between HDFC ERGO and Apollo Munich, both have strong holdings in the Health Insurance Industry. Apollo Munich is a joint venture between Apollo hospitals and German company Munich Re 51% stake is head by Apollo Munich that is founded by Pratap C Reddy. Munich Re is the second largest health insurance company holding a stake of 49% in Apollo Munich Health Insurance. Once the deal in finalized Munich Re will exit while Apollo Munich will own a nominal stake.
ERGO is the German insurer that holds 49% share in HDFC ERGO and is possessed by Munich Re. The proposed deal between Apollo Munich and HDFC ERGO will be exclusively advised by Arpwood Capital. Apollo Munich currently got around 1100 employees in about 40 offices pan India. They got around 4000 hospitals spread across 831 cities, this includes 53 Apollo Group Hospitals as well. They have been growing at CAGR of around 35% from past three years. 30% of the growth has been reported last year itself.
HDFC has already raised a capital of Rs 13,000 crore through a qualified institutional placement (QIP) this year. The company was on the hunt for the possibility to enhance business through mergers and acquisitions. HDFC ERGO General Insurance is a conglomerate of HFFC and ERGO International. They have already become third largest general insurance after acquiring L& T general insurance in the year 2016. Apollo Munich, a health insurance company that HDFC ERGO planning to acquire already got about .97 percentage share in the market. It is a profit making firm with the growth of its gross premium up to 32.89% by end of September this year.