Shares of Apollo Hospitals Enterprise Ltd surged on Thursday after the insurance regulator approved the hospitals group’s sale of 50.8% stake in its health insurance venture to Housing Development Finance Corp. Ltd (HDFC).
In June, the hospitals group had announced that HDFC, India’s largest mortgage financier, has agreed to acquire the entire 50.8% stake of Apollo Hospitals Group in Apollo Munich Health Insurance Co. Ltd for ₹1,336 crore.
Out of the proceeds, around ₹1,036 crore will go to Apollo’s promoters, while Apollo Hospitals will receive ₹300 crore. HDFC is also buying an additional 0.4% stake from Apollo Munich’s employees.
“The Corporation and HDFC Ergo have received all requisite approvals for the acquisition including Competition Commission of India (CCI), Reserve Bank of India and the last being from the insurance regulator on 1 January. Post the completion of the proposed acquisition, Apollo Munich will be merged with and into HDFC Ergo, subject to approval from the Mumbai bench of National Company Law Tribunal," HDFC said in a regulatory filing.
The acquisition is expected to be completed by 9 January. Apollo Hospitals shares rose 4.73% to ₹1,494.35 on BSE.
The regulatory approval comes as a major relief to Apollo’s promoters, who have been busy in the recent months in deleveraging promoter level debt.
As of 31 December, Apollo Hospitals promoters’ had pledged 67% of their 30.8% shareholding in the company.
Mint reported on 17 December that Apollo Hospitals promoters had raised $100 million ( ₹700 crore) from HDFC to help repay immediate debt obligations.
The loan was used by Apollo promoters to repay debt owed to Credit Suisse. Mint reported on 19 July, that Apollo promoters had raised short-term debt (maturity of three months) of ₹1,000 crore from Credit Suisse to repay debts that were coming up for maturity back then.
The promoter group had initially intended to repay the Credit Suisse loan through proceeds of the Apollo Munich stake sale.