India-based private sector lender HDFC has agreed to acquire the entire 50.8% stake of Apollo Group, in Apollo Munich Health Insurance Company, for Rs13.36bn ($192m).

Additionally, the bank has also agreed to buy 0.4% shareholding held by a few employees for a consideration of Rs108.4m ($1.56m).

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After completion of the transaction, HDFC will merge the Apollo Munich Health Insurance Company with its own insurance entity HDFC ERGO General Insurance Company.

On a pro-forma basis, the combined insurance firm is expected to have a market share of 6.4% of non-life insurance industry. It will have a network of 308 branch offices across the country.

Additionally, it will become the second largest private insurer in the accident and health segment with a market share of 8.2%.

HDFC and HDFC ERGO General Insurance chairman Deepak Parekh said: “Health insurance penetration in India is still at a very nascent stage compared to the global average, but is expected to drive growth of the general insurance industry in the times to come.

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“This transaction will strengthen the HDFC group’s commitment to the growing health insurance segment. The combined expertise of HDFC ERGO and Apollo Munich will result in greater product innovation, wider distribution and enhanced servicing capabilities, benefiting their 12 million policy holders.”

The transaction is subject to regulatory approvals by National Housing Bank (NHB), Insurance Regulatory and Development Authority of India (IRDAI) and Competition Commission of India (CCI).

The subsequent merger of Apollo Munich with HDFC ERGO will require approval of the shareholders, National Company Law Tribunal (NCLT), and final approval of IRDAI.