Prathap C. Reddy and his family, founders of India’s Apollo Hospitals Enterprise Ltd., plan to sell their holdings in an insurance venture with Munich Re AG to repay debt, people with knowledge of the matter said.
The family is seeking to sell its entire holding of 41 percent in Apollo Munich Health Insurance Co., for about Rs1200 crore ($170 million) in six months, the people said asking not to be identified as the discussions are private.
The proceeds will be used to repay part of the debt raised by pledging Apollo Hospital’s equity as collateral, the people said.
Investors have been concerned about leveraged companies including Subhash Chandra’s Essel Group and Anil Ambani-controlled firms that have borrowed by offering shares as collateral leaving them vulnerable to margin calls as stocks plummet. Shares of Apollo, India’s biggest hospital chain operator, which has about 34.3 billion rupees of debt, plunged the most in seven years on Monday after the founders pledged more shares to raise funds to repay debt.
“We are aware of the recent increase in our pledge levels,” Apollo’s Managing Director Suneeta Reddy said in a text message when asked about the asset sale plan. “We have clear plans to reduce the same by at least 50 percent over the next six months.” She however didn’t comment about the plan to sell stake in the insurance venture.
More than three-fourth of about 34 percent stake that the Reddy family holds in the hospital operator is kept as collateral for loans, the people said. Four companies including two private equity funds have shown interest in acquiring the family’s holdings in the venture with the world’s largest reinsurer, one of the people said, declining to disclose further details.
Munich Re is also planning to sell it’s stake in the venture, the Economic Times reported in November. The German company is in talks with HDFC Ergo General Insurance Co., according to the report.
However, a senior officials of the HDFC Ergo Gweneral said there are no plans to buy Apollo Munich Health Insurnace.
“There are discussions between the two companies about the issue but no conclusion or any kind of decision have been made so far,'' said a senior official of HDFC Ergo.
Apollo Munich Health’s gross written premiums, or the revenue from insurance contracts, jumped by a third to 17.2 billion rupees in the year ended March 2018. Apollo Hospitals’ owns about 10 percent of the venture.
SBI General Insurance
Meanwhile, industry sources pointout that Insurance Australia Group (IAG), the Australian partner in SBI General Insurance with 26 per cent stakes, is looking to exit its nineyear-old Indian joint venture as part of a larger global realignment.
“IAG has decided to exit SBI General and do it gradually and not at one shot,'' said sources at SBI General.
Some of the world’s largest strategic investors including re/insurers such as Swiss Re, Zurich Insurance, Liberty General and private equity firms such as Apax, Advent, Blackstone Group, Warburg Pincus and KKR, Canada Pension Plan Investment Board (CPPIB), sovereign wealth funds such as Abu Dhabi Investment Authority (ADIA) and Temasek have been approached by the IAG to buy a 26 per cent stake in SBI General Insurance for around Rs 3,400 crore, said people with knowledge of the matter,said a media report..
IAG, the biggest Australian general insurer is restructuring its Asia-Pacific operations and has already exited Indonesia, Thailand and Vietnam, said the people cited above. India and Malaysia are next on the agenda.
IAG, which specialises in motor and property insurance, has invested about A$850 million in the region since 1998 and has a presence in five Asian markets – Thailand, Vietnam, Indonesia, Malaysia and India.
The deal may happen before SBI General, valued around Rs 12,000 crore. finalises its plans to go for an Initial Public Offering(IPO)