HDFC Chairman Deepak Parekh during a reception hosted by the British Deputy High Commissioner Shekhar Iyer to celebrate the 90th birthday of Queen Elizabeth II in Mumbai on May 26, 2016. Image Source: IANS
HDFC ERGO, non-life insurance arm of housing finance major HDFC, on Friday said it will acquire L&T General Insurance for Rs 551 crore in an all-cash deal.
"Considering the importance of scale in the insurance business, consolidation within the industry is inevitable. This transaction marks the beginning of this consolidation phase," HDFC Chairman Deepak Parekh said in a statement.
The combined size and expertise will result in improved cost efficiencies in the merged entity and benefit policy holders and other stakeholders, he said.
The transaction has been valued at Rs 551 crore and the acquisition would help HDFC ERGO improve its market position, the statement said.
HDFC ERGO, which operates through 108 offices, had gross premium of Rs 3,467 crore and made a profit after tax of Rs 151 crore.
L&T General Insurance, a wholly-owned subsidiary of engineering conglomerate Larsen and Toubro (L&T), wrote gross premium of Rs 483 crore registering a growth of 40% over previous financial year. The company operates through 28 offices with 800 employees.
HDFC ERGO, a 51:49 joint venture between HDFC and ERGO International, is the fourth largest private sector general insurance company.
In a separate statement, HDFC said on Friday it concluded the transfer of 12.33 crore shares at price of Rs 90.973 per equity, aggregating to a consideration of Rs 1,122 crore.
As HDFC ERGO is an unlisted entity, the capital gains tax on the sale of shares is Rs 197 crore, resulting in a post tax profit of Rs 725 crore.
As a result of the sale of shares, HDFC's holding in HDFC ERGO now stands at 50.73%, while ERGO's share is 48.74%, it said.
"In accordance with past practice and with the objective of further strengthening the Corporation's balance sheet, the Corporation believes that it would be prudent to utilise the one-off pre-tax gains to shore up the Provision for Contingencies Account and thereby build an additional buffer against any unexpected risk in the future," it said.
Accordingly, it said HDFC proposes to make an additional special provision of Rs 275 crore being 30% of the pre-tax gains on this transaction towards standard assets and other contingencies.
"It may be noted that the special provision is being done voluntarily and is not on account of any regulatory requirement. Further, the provision is in respect of standard assets," it added.
By continuing to browse or use our sites, you agree that we can store and access cookies and other tracking technologies as described in this policy.
A cookie is a small text file that can be stored on and accessed from your device when you visit one of our sites, to the extent you agree. The other tracking technologies work similarly to cookies and place small data files on your devices or monitor your website activity to enable us to collect information about how you use our sites. This allows our sites to recognize your device from those of other users on our sites. The information provided below about cookies also applies to these other tracking technologies.
These are those cookies that belong to us and which we place on your device or are those set by a website that is being visited by the user at the time (e.g., cookies placed by zeenews.india.com)
Some features used on this website may involve a cookie being sent to your computer by a third party. For example, if you view or listen to any embedded audio or video content you may be sent cookies from the site where the embedded content is hosted. Likewise, if you share any content on this website through social networks (for example by clicking a Facebook “like” button or a “Tweet” button) you may be sent cookies from these websites. We do not control the setting of these cookies so please check the websites of these third parties for more information about their cookies and how to manage them.
Session cookies are temporary and deleted from your machine when your web browser closes. We use session cookies to help us track internet usage as described above.
The data collected by the sites and/or through Cookies that may be placed on your computer will not be kept for longer than is necessary to fulfil the purposes mentioned above. In any event, such information will be kept in our database until we get explicit consent from you to remove all the stored cookies.
These cookie are essential to our site in order to enable you to move around it and to use its features. Without these essential cookies we may not be able to provide certain services or features and our site will not perform as smoothly for you as we would like. These cookies, for example, let us recognize that you have created an account and have logged in/out to access site content. They also include Cookies that enable us to remember your previous actions within the same browsing session and secure our sites.
These cookies are used by us or by our third-party service providers to analyse how the sites are used and how they are performing. For example, these cookies track what content are most frequently visited, your viewing history and from what locations our visitors come from. If you subscribe to a newsletter or otherwise register with the Sites, these cookies may be correlated to you.
These cookies let us operate the sites in accordance with the choices you make. These cookies permit us to "remember you” in-between visits. For instance, we will recognize your user name and remember how you customized the sites and services, for example by adjusting text size, fonts, languages and other parts of web pages that are alterable, and provide you with the same customizations during future visits.
If you do not want cookies to be dropped on your device, you can adjust the setting of your Internet browser to reject the setting of all or some cookies and to alert you when a cookie is placed on your device. For further information about how to do so, please refer to your browser ‘help’ / ‘tool’ or ‘edit’ section for cookie settings w.r.t your browser that may be Google Chrome, Safari, Mozilla Firefox etc.
Please note that if your browser setting is already setup to block all cookies (including strictly necessary Cookies) you may not be able to access or use all or parts or functionalities of our sites.
If you want to remove previously-stored cookies, you can manually delete the cookies at any time from your browser settings. However, this will not prevent the sites from placing further cookies on your device unless and until you adjust your Internet browser setting as described above.
For more information on the development of user-profiles and the use of targeting/advertising Cookies, please see www.youronlinechoices.eu if you are located in Europe or www.aboutads.info/choices if in the United States.