ERGO hikes stake in HDFC ERGO; buys 22.9% for Rs 1,122 cr

Germany's ERGO International will buy 22.9 per cent additional stake in HDFC ERGO General Insurance for Rs 1,122 crore, becoming the latest foreign insurer to increase holding in Indian venture following relaxation of FDI norms in the sector.
"Housing Development Finance Corporation Ltd (HDFC) and the ERGO Insurance Group, Germany (ERGO) today announced that they had agreed the terms under which ERGO would increase its stake in HDFC ERGO General Insurance Company," HDFC said in a regulatory filing.
Under the agreement, ERGO will buy 12,33,57,262 shares of HDFC ERGO at a price of Rs 90.97 per share aggregating to Rs 1,122 crore, said a statement in the filing.

"As a result of this, ERGO's shareholding in HDFC ERGO will increase from 25.84 per cent to 48.74 per cent, while that of HDFC will come down from 73.63 per cent to 50.73 per cent," it said.
The statement further said that the proposed transaction would value HDFC ERGO at Rs 4,900 crore.
HDFC ERGO remains a subsidiary of the Corporation, HDFC said.

Under the shareholders' agreement between HDFC and ERGO, ERGO had the right to increase its shareholding from 26 per cent in HDFC ERGO as and when the laws permitted such increase.
The raise in stake by the German partner in the company is a consequence of the Indian government allowing foreign entities to raise their stake in the domestic private sector insurance joint ventures to up to 49 per cent from earlier limit of 26 per cent.

HDFC ERGO offers general insurance products ranging from motor, health, travel, home, personal accident. Besides, it offers customised services like property, marine and liability insurance in retain space.
Recently, a number of foreign players in the sector have raised stakes in Indian JVs including Nippon in Reliance Life Insurance, AXA in Bharti AXA Life Insurance, Bupa in Max BUPA health insurance and Sunlife Financial Inc in Birla Sunlife.
The increased foreign capital in the Indian insurance space is expected to boost competition among various players and help deepen insurance penetration in the country.