New Delhi, Jun 19 (PTI) HDFC Bank on Saturday said its board has given its approval to buy more than 3.55 crore shares in group firm HDFC ERGO General Insurance Company for over Rs 1,906 crore from the parent company Housing Development Finance Corporation (HDFC).

"The board of directors of HDFC Bank at its meeting held on June 18, 2021 has approved the purchase of 3,55,67,724 equity shares of Rs 10 each, representing 4.99 per cent of the outstanding issued and paid-up capital of HDFC ERGO General Insurance Company Ltd from HDFC Ltd," HDFC Bank said in the filing.

HDFC is the promoter and related party of the bank.

The purchase is to happen at a price determined on an independent evaluation report, subject to receipt of necessary approvals including regulatory approvals and approval from shareholders of the bank, it said.

"The aggregate consideration for purchase of 3,55,67,724 shares of HDFC ERGO is Rs 1,906.43 crore, i.e. Rs 536 per share," it said further.

HDFC ERGO General Insurance had a gross written premium of Rs 12,444 crore for the year ended March 2021. The company's net worth stood at Rs 2,927 crore.

The private sector general insurer is one of the fastest growing companies among the peers with its gross written premium growing at a 35 per cent compounded annual growth rate (CAGR) over the last 13 years.

"The proposed transaction enables the bank to participate in the growth opportunity of HDFC ERGO and augment HDFC ERGO's growth prospects leading to long-term value creation by HDFC ERGO to its shareholders," it said.

The bank has been a distribution partner of the insurer since 2009.

The transaction, indicative to be closed by September this year, will require approval from insurance sector regulator Irdai and banking regulator RBI. Any other necessary regulatory or government approval will be evaluated prior to the share purchase agreement, HDFC Bank said.

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