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HDFC Ergo general insurance company, promoted by Housing Development Finance Corporation, today agreed to buy L&T General Insurance for Rs 551 crore, first buyout in the general insurance industry .
The two companies signed off the deal on a Friday late evening, said two people in the know of the development.
"HDFC has agreed to pay around 1.1 times the gross premium of L&T General Insurance Company," said one of the persons, who did not wish to be identified.
This will help HDFC Ergo improve its ranking in the sector from fourth largest to third largest in the private sector insurance segment. The industry is dominated by state-owned New India Assurance, United India, National India and Oriental Insurance Company. In the private sector space, ICICI Lombard and Iffco Tokio are large players.
L&T General Insurance, owned by India's largest engineering company L&T, has tried in the past to merge with smaller rivals to expand its network and attain scale and size. In 2013, L&T attempted to merge its general insurance subsidiary with Future Generali Insurance but called off the plan due to differences over valuation.
The insurance sector is in a consolidation phase, with foreign insurers stepping up their share in the Indian joint venture companies after the government last year gave the go-ahead to increase in foreign direct investment limit to 49% from 26%.
