Housing Development Finance Corporation (HDFC) is set to reduce its shareholding in general insurance subsidiary HDFC Ergo to below 50% in order to meet regulatory norms.
The company entered into a share purchase agreement to sell more than 4.4 million shares of INR10 each to the foreign JV partner Ergo International.
The figure represents around 0.62% of the issued and paid-up share capital of HDFC Ergo.
The INR2.36bn ($32.16m) sale is expected to be completed by 12 May 2021.
In a stock exchange filing, HDFC said: “We would like to inform you that Housing Development Finance Corporation Ltd. (HDFC), in accordance with the direction of Reserve Bank of India to reduce its shareholding in HDFC Ergo to 50% or below, has today entered into a share purchase agreement for sale of 44,12,000 equity shares of INR10 each, representing 0.62% of the issued and paid-up share capital of HDFC Ergo.”
The statement added ERGO International does not belong to the promoter/ promoter group of HDFC.
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By GlobalDataOnce the deal completes, HDFC Ergo will no longer be a subsidiary company of HDFC.
For the fiscal year that ended on 31 March 2021, the total income of HDFC Ergo was INR75.57bn. The figure was 5.43% of the consolidated income of HDFC.
Last year, the central bank of the country asked HDFC to reduce its stake in subsidiaries HDFC Ergo and HDFC Life Insurance to less than 50%.
