The non-life insurance arm of Housing Development and Finance Corporation (HDFC), HDFC ERGO General Insurance, has finalized to acquire the engineering major L&T’s general insurance unit in a deal, valued at Rs. 551 crore which is known to be all-cash.
The deal will help HDFC ERGO – the fourth largest private sector general insurer – to increase its market share from 3.7 per cent to 4.2 per cent. The acquisition is the first such in the highly competitive domestic market.
“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,” said Deepak Parekh, Chairman of HDFC Ltd and HDFC ERGO General Insurance.
The deal was structured by Arpwood Capital Pvt Ltd., HDFC ERGO said in a statement. The deal is subject to approval from regulatory authorities.
HDFC ERGO expects significant cost synergies arising out of business, rationalization of offices, and technology optimization.
“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 policyholders and other stakeholders,” Mr Parekh added.
